Data centres are going through a boom. Thanks to the massive amount of money being spent on generative artificial intelligence (AI), companies need more servers (and, by extension, places that house servers) than ever before.
That means that they need more data centres. Data centres are the physical facilities in which remote servers are housed. In addition to renting out servers, data centres also provide services, such as indoor cooling and technical support. Without data centres, the modern internet would not be feasible. And now, with generative AI gobbling up more computing power than ever before, data centres are becoming even more relevant than they were a few short years ago. And those who run those data centres are making considerable sums of money. In this article, I will explore how you, as an individual Canadian investor, can profit from the AI data centre boom.
The options
When it comes to profiting off the data centre boom, you have a few basic options:
- Buy AI computer chip stocks like NVIDIA. These build the hardware that AI data centres run on.
- Invest directly in AI data centres. You can do this through Equinix Inc.
- Invest in diversified companies that run AI data centres in addition to doing other things. You can do this through Brookfield (TSX:BN) and Brookfield Infrastructure Partners (TSX:BIP.UN).
For my money, the third option on this list is by far the most appealing.
AI chip stocks have certainly gone on a greater run in recent years, but they’ve run so hot that they are now quite pricey as a group.
Pure-play AI data centre companies are definitely worth looking into, but as with “pure plays” in anything, they are riskier, less-diversified options.
Diversified companies that invest in AI data centres give you the best overall risk and reward profile. On the one hand, they do have some AI data centre exposure. On the other hand, the exposure is not so great that you would lose your shirt if the AI boom went bust.
The two Brookfields
Having shared which AI data centre investment strategy I like best, I should explore the two names I mentioned in detail.
Brookfield Infrastructure Partners is an infrastructure company/fund that invests in data centres, cellular towers, pipelines, utilities and more. It has been upping its data centre investments in recent years. In the last two years, it has added data centres in the Southern United States. It is always looking to add more. BIP.UN’s data centre assets are held alongside many other uncorrelated assets, making it somewhat less risky (at least in theory) compared to a pure-play data centre operator.
Then we have Brookfield Corp. It’s the parent company of Brookfield Infrastructure Partners. The basic AI data centre play here is the company owns a chunk of Brookfield Infrastructure Partners and gets exposure to data centres that way. The virtue of this option is that it is even more diversified than BIP.UN itself, and even more able to withstand adverse future scenarios for AI data centres.
Foolish bottom line
There are many ways to profit from the AI revolution: software companies, chip companies, data centre companies, and more. Heck, you could even try developing AI applications yourself. The opportunities in AI are endless, and data centres are among the most overlooked components of it.
