{"id":37988,"date":"2023-07-20T01:32:16","date_gmt":"2023-07-20T05:32:16","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/why-this-real-estate-related-corner-of-the-stock-market-may-benefit-from-ai\/"},"modified":"2023-07-20T01:32:18","modified_gmt":"2023-07-20T05:32:18","slug":"why-this-real-estate-related-corner-of-the-stock-market-may-benefit-from-ai","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=37988","title":{"rendered":"Why this real-estate-related corner of the stock market may benefit from AI"},"content":{"rendered":"
\n

Data centers stand to benefit from the rise of artificial intelligence, with generative AI opening up a potentially attractive opportunity within the stock market\u2019s real-estate sector, according to Morgan Stanley\u2019s Laurel Durkay.\u00a0<\/p>\n

Durkay, who is head of global listed real assets at Morgan Stanley Investment Management, said in an interview that the heavy computing power that AI requires may make some data centers more valuable. AI will probably create a new wave of demand for these properties, sparking new development as well as the expansion of existing data centers to support workloads in the digital economy, she said.<\/p>\n

\n

\u201cWhat we\u2019re seeing is the real infancy of demand drivers stemming from artificial intelligence,\u201d Durkay said by phone. \u201cThere is a difference between the server requirements for workloads in artificial intelligence versus the workloads for traditional applications.\u201d<\/p>\n

Data centers house servers, with the GPU, or graphics processing unit, needed for AI requiring more power than traditional applications such as cloud computing, according to Durkay. She said that historically, \u201cthe vast majority of servers have been CPUs,\u201d or central processing units.<\/p>\n

\u201cThe GPU is going to be significantly more sophisticated, a lot more intense,\u201d she said. \u201cA GPU allows for parallel processing and computing so that thousands of jobs can run simultaneously.\u201d<\/p>\n

Within the U.S. real-estate securities market, Digital Realty Trust Inc.
\n DLR,
\n +3.29%<\/bg-quote>
\n and Equinix Inc.
\n EQIX,
\n +2.10%<\/bg-quote>
\n are among \u201cthe biggest players\u201d in data centers, according to Durkay. Companies like DigitalBridge Group Inc.
\n DBRG,
\n -0.29%<\/bg-quote>
\n and Iron Mountain Inc.
\n IRM,
\n +0.65%<\/bg-quote>
\n may also provide some exposure to the data-center theme, she said, although they\u2019re not \u201cpure plays.\u201d\u00a0<\/p>\n

\u201cIt has yet to be determined where the major hubs of artificial-intelligence data centers will be,\u201d said Durkay. The largest data-center markets in the U.S. are now in Santa Clara, Calif., and northern Virginia, as the \u201cearly backbone of the internet\u201d was built in those areas, she said, citing their \u201ccable and fiber connectivity\u201d as well as the availability of power.<\/p>\n

While that connectivity remains important today, \u201cthe challenge is going to be that power availability\u201d to meet AI-related demands, according to Durkay.<\/p>\n

Other areas for data centers include northern New Jersey, Atlanta, Dallas and Chicago, she said.<\/p>\n

AI buzz<\/h4>\n

\u201cAI is a big buzzword,\u201d said Randy Frederick, managing director of trading and derivatives at Charles Schwab, by phone. \u201cEverybody wants to know where the opportunities are\u201d for investing. He\u2019s expecting that in the next three decades, \u201cAI will change our lives as much as the internet itself has in the last 30 years.\u201d<\/p>\n

Generative AI has rapidly become a popular investment theme after the release of the ChatGPT app late last year.<\/p>\n

So far stock-market investors have \u201creally concentrated their support\u201d for the AI theme at the \u201cmegacap tech level,\u201d according to Jay Jacobs, BlackRock\u2019s U.S. head of thematics and active equity ETFs. \u201cWe\u2019ve seen the giants in the space from hardware and software really rallying this year,\u201d he said by phone, pointing to the \u201cmarket\u2019s excitement around their growth prospects.\u201d<\/p>\n

Among megacap tech stocks, chip maker Nvidia Corp.
\n NVDA,
\n -0.88%<\/bg-quote>
\n has skyrocketed 222% this year through Wednesday, while Microsoft Corp.
\n MSFT,
\n -1.23%<\/bg-quote>
\n jumped around 48% over the same period.\u00a0<\/p>\n

What the market may have \u201cmissed\u201d is the \u201csecond-order effects of AI,\u201d Jacobs said. In other words, the \u201cdownstream beneficiaries\u201d of increasing AI adoption, including the \u201cregular nuts and bolts of digital infrastructure,\u201d he said, pointing to data centers as an example.<\/p>\n

For exposure to AI, BlackRock suggests investors might consider funds such as the iShares Semiconductor ETF
\n SOXX,
\n -1.19%<\/bg-quote>,<\/span>
\n iShares Expanded Tech Sector ETF
\n IGM,
\n -0.14%<\/bg-quote>,<\/span>
\n iShares U.S. Tech Breakthrough Multisector ETF
\n TECB,
\n +0.25%<\/bg-quote>
\n and iShares Robotics and Artificial Intelligence Multisector ETF
\n IRBO,
\n +0.54%<\/bg-quote>,<\/span>
\n according to Jacobs.\u00a0<\/p>\n

The iShares U.S. Tech Breakthrough Multisector ETF has a small weight in the category associated with data center REITs, or real-estate investment trusts, according to a spokesperson for BlackRock. The fund\u2019s holdings as of July 18 included Digital Realty Trust and Equinix, according to holdings data on BlackRock\u2019s website.\u00a0<\/p>\n

\u201cWe haven\u2019t been living in this new AI world for very long,\u201d said Jacobs. \u201cIt\u2019s still early.\u201d<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Data centers stand to benefit from the rise of artificial intelligence, with generative AI opening up a potentially attractive opportunity within the stock market\u2019s real-estate sector, according to Morgan Stanley\u2019s Laurel Durkay.\u00a0 Durkay, who is head of global listed real assets at Morgan Stanley Investment Management, said in an interview that the heavy computing power […]<\/p>\n","protected":false},"author":1,"featured_media":37989,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-37988","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nWhy this real-estate-related corner of the stock market may benefit from AI | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Data centers stand to benefit from the rise of artificial 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