Digital Infrastructure Investments 2025: Data Center REITs, AI-Driven Energy Demand & Growth Projections

Mobilizing billions for sustainable digital infrastructure to unlock global connectivity and economic growth in 2025

last updated Thursday, September 25, 2025
#digital infrastructure investments #data center reits

---



by John Burson

QUICK LINKS

The explosion of artificial intelligence applications and the exponential growth of data generation have created an unprecedented demand for digital infrastructure investments in 2025. As businesses worldwide embrace AI-powered solutions, the underlying infrastructure supporting these technologies has emerged as one of the most compelling investment opportunities of the decade.

AI Infrastructure Market Snapshot 

Metric	Current Value	2030 Projection	Growth Rate
AI Data Center Market	$236.44 billion	$933.76 billion	31.6% CAGR
Global Data Center Power Demand	536 TWh (2025)	1,072 TWh	165% increase
Average Power Density	17 kW per rack	30 kW by 2027	76% increase
Mag 7 Tech CapEx	$385-598 billion	Est. $800+ billion	35%+ growth

At the core of the AI revolution is the rapid advancement in semiconductor technology. A computation task that used to take 32 hours to perform can now be accomplished in just one second with the latest GPU technology. This technological leap has fundamentally altered power requirements and infrastructure needs, creating new opportunities for infrastructure investors and tech-focused funds.

The digital infrastructure sector encompasses data centers, fiber networks, and edge facilities that form the backbone of our increasingly connected economy. As we navigate through 2025, the convergence of AI workloads, cloud computing expansion, and edge computing deployment has positioned digital infrastructure as a critical asset class for investors seeking exposure to the digital economy's growth trajectory.

Click here to read about: REIT Sector Performance Q3 2025: Data Centers & Industrial Lead Recovery

Defining Digital Infrastructure in the Modern Economy

Digital infrastructure represents the physical foundation supporting our digital economy, comprising three core components:

1. Data centers
2. Fiber networks
3. Edge computing facilities. 

Unlike traditional infrastructure, these assets are characterized by their ability to process, store, and transmit vast amounts of digital information while supporting increasingly complex computational workloads.

The differentiation between traditional and AI-optimized facilities has become increasingly pronounced in 2025. Traditional data halls may support 8–12 kW per rack. AI applications require 40–100 kW of power. This dramatic increase in power density requirements has created demand for next-generation facilities equipped with advanced cooling systems, robust power distribution, and enhanced connectivity capabilities.

Investment vehicles in this sector primarily include Real Estate Investment Trusts (REITs), private equity funds, and specialized infrastructure funds. Data center REITs have emerged as particularly attractive vehicles, offering investors liquid exposure to this high-growth sector while providing steady dividend income backed by long-term lease agreements with credit-worthy tenants.

AI-Driven Energy Consumption Trends

The energy consumption profile of AI workloads represents a paradigm shift from traditional computing applications. Modern AI training and inference operations require sustained high-performance computing capabilities, resulting in significantly higher power densities and continuous energy consumption patterns.

Power Density Evolution Chart

Traditional Data Centers (2020):    8 kW/rack  ████████
Current AI Centers (2025):         17 kW/rack  █████████████████
Future AI Centers (2027):          30 kW/rack  ██████████████████████████████
AI Training Models:               80+ kW/rack  ████████████████████████████████████████████████████████████████████████████████

Goldman Sachs Research forecasts global power demand from data centers will increase 50% by 2027 and by as much as 165% by the end of the decade, while average power densities have more than doubled in just two years, to 17 kilowatts (kW) per rack, from eight kW, and are expected to rise to as high as 30 kW by 2027 as AI workloads increase.

Key Energy Statistics:

• Data centers will consume about 536 terawatt-hours (TWh) in 2025, representing 2% of global electricity consumption
• AI data centers face projected electricity consumption doubling from 536 TWh in 2025 to 1,072 TWh by 2030
• Training models like ChatGPT can consume more than 80 kW per rack

The Power Usage Effectiveness (PUE) metric has become increasingly important as operators strive to optimize performance while managing rising energy costs. Leading AI-focused data centers are implementing innovative cooling solutions, including liquid cooling systems and immersion cooling technologies, to maintain optimal PUE ratios while supporting high-density computing environments.

Carbon reduction initiatives have gained significant traction, with operators investing in on-site renewable energy generation, energy storage systems, and advanced power management technologies. These sustainability initiatives not only reduce environmental impact but also provide operational cost advantages and enhanced ESG credentials, which are attractive to institutional investors.

Data Center Investing Landscape

The data center REIT sector has demonstrated remarkable resilience and growth throughout 2025, with institutional and retail investors increasingly recognizing the defensive characteristics and growth potential of these assets.

Data Center REIT Performance Spotlight

Since market volatility in April 2025, data center REITs have posted total returns of 6.4% through June, making it the second-best performing REIT sector. This performance reflects robust underlying fundamentals and growing investor confidence in long-term prospects.

Leading Data Center REITs Performance (as of September 2025)

Digital Realty Trust (DLR)

• Market Cap: Leading position
• 1-Year Return: +13.28% (as of Sept 22, 2025)
• Stock Price: $174.69
• Performance Note: Top 5 performer with +19% return from April-July 2025

Equinix Inc. (EQIX)

• Market Cap: $76.289 billion (world's largest data center REIT)
• 1-Year Return: -7.06% (as of Sept 22, 2025)
• Stock Price: $798.07
• Global Footprint: 260 data centers in 33 countries
• Revenue Growth: From $1.5B (2010) to $9B+ today

Sector Fundamentals:

• Occupancy rates: Consistently exceeding 95% in major markets
• Lease durations: Extended terms as enterprises secure long-term capacity
• FFO Growth: Core funds from operations growth of 5.8% anticipated for 2025
• Credit Quality: Investment-grade ratings with conservative dividend payout ratios

Key valuation metrics for data center REITs include Adjusted Funds From Operations (AFFO) per share, occupancy rates, and average lease duration. Yield spreads compared to traditional property REITs have compressed as investors recognize the defensive characteristics and growth potential of data center assets. However, the sector continues to offer attractive risk-adjusted returns, supported by predictable cash flows from investment-grade tenants.

Tech-Focused Infrastructure Funds

Major private-equity investors have been eagerly acquiring medium-sized and large data center REITs and developers, with unprecedented partnership formations signaling massive capital commitments to the sector.

Mega Partnership Formations in 2025:

$100 billion Global AI Infrastructure Investment Partnership

• Partners: BlackRock Inc., Microsoft, MGX
• Focus: AI-optimized data center development and power infrastructure

$50 billion KKR-Energy Capital Partners Alliance

• Investment horizon: Multiple years
• Target areas: Data centers and power generation facilities

Leading Infrastructure Funds in Digital Assets:

• Brookfield Infrastructure Partners: Specialized digital infrastructure acquisitions
• Blackstone Infrastructure Partners: Focus on next-generation facility development
• Strategic positioning in emerging markets and greenfield developments

Fund Structure Comparison

Fund Type	Liquidity	Return Potential	Investment Horizon	Risk Profile
Listed Infrastructure	Daily	Moderate	3-7 years	Medium
Private Infrastructure	Limited	Higher	7-15 years	Medium-High
Hybrid Vehicles	Quarterly	Moderate-High	5-10 years	Medium

Investment Considerations:

1. Listed funds provide daily liquidity but may trade at premiums/discounts to NAV.
2. Private funds typically offer higher return potential, accompanied by extended lock-up periods.
3. Risk-return profiles reflect a focus on critical infrastructure with high barriers to entry.
4. Long-term contracts provide predictable cash flows from credit-worthy tenants.
5. Construction risks, technology evolution, and regulatory changes require careful evaluation.

Learn how to do REIT Valuation using FFO and AFFO metrics.

Energy Infrastructure Integration

The integration of energy infrastructure with data center operations has become a defining characteristic of modern digital infrastructure investments. On-site renewable power generation, including solar installations, fuel cells, and microgrids, enables operators to reduce energy costs while enhancing grid resilience.

Utility partnerships and virtual Power Purchase Agreements (PPAs) offer alternative approaches to securing clean energy while supporting the development of renewable energy sources. These arrangements enable data center operators to maintain grid connectivity while achieving sustainability objectives and potentially realizing cost savings.

Energy storage solutions are increasingly being deployed alongside data centers to provide backup power, grid stabilization services, and peak demand management. The synergy between data centers and electric vehicle charging infrastructure presents additional revenue opportunities and supports broader trends toward electrification.

Growth Projections and Market Sizing

The global digital infrastructure market is experiencing unprecedented growth, driven by the adoption of AI and digital transformation initiatives across various industries.

Market Growth Trajectory

1. AI Data Center Market Expansion
   The global AI data center market size is anticipated to grow from USD 236.44 billion in 2025 to USD 933.76 billion by 2030, at a CAGR of 31.6% during the forecast period.
2. Power Demand Projections
   Goldman Sachs Research forecasts global power demand from data centers will increase 50% by 2027 and by as much as 165% by 2030 (compared with 2023).
3. Infrastructure Capacity Requirements
   McKinsey's analysis suggests that global demand for data center capacity could rise at an annual rate of between 19% and 22% from 2023 to 2030, reaching an annual demand of 171 to 219 gigawatts (GW).

Regional Growth Hotspots

NORTH AMERICA
├── Market Leadership Position
├── Hyperscale Cloud Expansion
└── Regulatory Support for Green Infrastructure

ASIA-PACIFIC  
├── Highest Growth Rates (25%+ CAGR)
├── Digital Adoption Surge
└── Government Digital Infrastructure Initiatives

EUROPE
├── Data Sovereignty Requirements
├── GDPR Compliance Driving Local Data Centers
└── Renewable Energy Integration Focus

Server Installation Trends:

1. Approximately 6.5 million servers were shipped in 2022, with an estimated rise to 7.7 million by 2028.
2. Total installed base growing from 14 million (2014) to projected 21 million (2020).
3. 1.6 million servers are related to AI workloads.

These projections highlight the substantial infrastructure investment needed to sustain the digital economy's ongoing expansion and the widespread adoption of AI technology across various sectors.

Key Investment Drivers and Catalysts

Primary Growth Catalysts

Hyperscale Cloud Expansion Capital expenditures by the "Magnificent Seven" mega-cap tech companies are expected to be between $385 billion and $598 billion in fiscal 2025. This massive investment directly translates to increased demand for data center capacity, with companies like:

• Amazon Web Services is expanding its global footprint.
• Microsoft Azure is building AI-optimized facilities.
• Google Cloud is investing in edge computing infrastructure.

Edge Computing Revolution: The convergence of multiple technologies is driving edge computing adoption:

• 5G Networks: Enabling ultra-low latency applications
• IoT Devices: Projected 75 billion connected devices by 2030
• Autonomous Systems: Self-driving vehicles, drones, robotics requiring real-time processing

Regulatory Tailwinds: Government policies are accelerating digital infrastructure investment:

• Carbon reporting requirements favor operators with strong ESG credentials
• Green tax incentives for renewable energy integration
• Data sovereignty regulations requiring local data storage capabilities

Investment Impact Metrics

Driver	Investment Scale	Timeline	Market Impact
Hyperscale CapEx	$385-598B (2025)	Immediate	High capacity demand
Edge Computing	$250B+ by 2030	5-7 years	Distributed infrastructure
Green Incentives	$50B+ annually	Ongoing	Sustainability premium

These catalysts are creating a multi-year investment cycle with sustained visibility of demand for digital infrastructure assets.

Risks and Challenges

Despite strong growth prospects, digital infrastructure investments face several critical challenges that investors must carefully evaluate.

Primary Risk Factors

Power Grid Constraints - The #1 Challenge

The number one constraint facing data center developers today is securing access to power.

Grid limitations and lengthy interconnection processes can delay project development and limit expansion opportunities, with some projects facing delays of 3-5 years for power connections.

Energy Price Volatility

• High power consumption creates significant operational risk exposure
• Forward contracting and renewable energy provide some mitigation
• Regional energy market fluctuations impact profitability

ESG Pressures Intensifying Environmental scrutiny is increasing as data centers face criticism over their projected electricity consumption, expected to double from 536 TWh in 2025 to 1,072 TWh by 2030. Operators must balance growth with sustainability commitments.

Additional Risk Considerations

Technology Evolution Risks:

• Rapid semiconductor advancement may render facilities obsolete
• Computing architecture changes (quantum, neuromorphic chips)
• Cooling technology disruption requiring facility retrofits

Geopolitical & Supply Chain:

• Trade policy impacts on equipment procurement
• International expansion complications
• Critical component shortage risks (semiconductors, cooling systems)

Market Dynamics:

• Intense competition for prime locations
• Rising construction and land costs
• Skilled labor shortages in technical roles

Risk Mitigation Strategies

1. Diversification
   Geographic and tenant diversification.
2. Technology Flexibility
   Modular designs enabling upgrades.
3. Energy Hedging
   Long-term power purchase agreements.
4. ESG Leadership
   Proactive sustainability initiatives.

Strategic Investment Opportunities

Early-stage data center developments in emerging markets offer substantial return potential as digital adoption accelerates in developing economies. These markets typically offer lower land and construction costs while benefiting from favorable demographic and economic trends.

Partnerships with AI service providers can provide secure revenue streams and strategic positioning in high-growth market segments. These relationships can include joint ventures, build-to-suit developments, or long-term capacity agreements.

Retrofitting legacy facilities for AI workloads presents an opportunity to enhance asset value while meeting the growing demand for high-density computing environments. These projects typically require significant capital investment in cooling and power infrastructure, but can generate attractive returns.

Co-investment in renewable microgrids offers diversification benefits while supporting sustainability objectives. These investments can provide additional revenue streams through grid services and energy sales while enhancing operational resilience.

Future Outlook and Investment Implications

The digital infrastructure sector is positioned for sustained growth as AI adoption accelerates across industries. Core funds from operations (FFO) growth of 5.8% is anticipated for 2025 among leading data center REITs, reflecting the sector's strong fundamental performance.

The global data center market size was estimated at USD 347.60 billion in 2024 and is anticipated to grow at a CAGR of 11.2% from 2025 to 2030, demonstrating the broader market opportunity beyond AI-specific applications.

For infrastructure investors, the digital infrastructure sector offers compelling characteristics, including predictable cash flows, high barriers to entry, and significant growth potential. However, successful investment requires careful consideration of location, technology specifications, and tenant quality.

The convergence of AI, cloud computing, and edge technologies is creating unprecedented demand for digital infrastructure investments. While challenges exist regarding power availability and environmental considerations, the fundamental drivers supporting this sector remain strong and are expected to continue accelerating through the remainder of the decade.

Conclusion

Digital infrastructure investments in 2025 represent a compelling opportunity for investors seeking exposure to the transformative impact of artificial intelligence and digital transformation. The sector combines the stability and predictable cash flows associated with traditional infrastructure investments with the growth potential of emerging technologies.

Data center REITs have emerged as attractive vehicles for accessing this opportunity, offering liquidity, professional management, and diversification benefits. Tech-focused infrastructure funds offer additional avenues for investment, leveraging specialized expertise in this rapidly evolving sector.

The integration of energy infrastructure with digital assets creates additional value creation opportunities while supporting sustainability objectives. As AI adoption continues to accelerate and digital transformation initiatives expand globally, digital infrastructure investments are positioned to benefit from multiple long-term growth drivers.

Success in this sector requires careful consideration of power availability, technology specifications, and evolving regulatory requirements. However, for investors with appropriate due diligence capabilities and risk tolerance, digital infrastructure offers the potential for attractive risk-adjusted returns supported by fundamental demand growth for digital services and AI capabilities.

Frequently Asked Questions

What makes data center REITs attractive in 2025?

Data center REITs provide exposure to AI-driven growth, characterized by predictable cash flows from long-term leases, high occupancy rates exceeding 95%, and strong total returns that outperformed most REIT sectors in the first half of 2025.

How is AI driving up energy demand in digital infrastructure?

AI applications require 40-100 kW per rack, compared to 8-12 kW for traditional workloads. The global data center power demand forecast is expected to increase by 165% by 2030, driven by the adoption of AI.

Which regions offer the highest growth for data center investments?

The Asia-Pacific region leads in growth rates, while North America maintains its market leadership. Europe presents opportunities driven by data sovereignty requirements and the adoption of cloud computing.

What are the top metrics to evaluate data center REIT performance?

Key metrics include AFFO per share, occupancy rates (targeting over 95%), average lease duration, PUE ratios for efficiency, and yield spreads compared to traditional property REITs.

How can investors integrate renewable energy sources into digital infrastructure portfolios?

Through on-site solar installations, virtual PPAs, energy storage systems, and co-investment in renewable microgrids that provide additional revenue streams and ESG benefits.

What risks should be considered when investing in AI-focused data centers?

Primary risks include power grid constraints, energy price volatility, ESG pressures, technological obsolescence, and geopolitical supply chain vulnerabilities.

 
 
 

Free Consultation