But with that said, the rise of the cloud did not happen overnight. Over the course of many years, Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform have evolved into more sophisticated products, spanning across database management, cybersecurity, and much more.

Similar to cloud infrastructure, AI platforms should become more advanced in the coming years. Equinix’s core data center services, including its xScale suite, stand to benefit from secular tailwinds fueling AI demand — particularly the $1 trillion IT infrastructure opportunity.

Fox-Martin gave investors a preview of the long-run impacts AI could have on the business when he shared, “As with cloud, Equinix continues to be the preferred location for network nodes as customers seek the right connectivity solutions for data ingestion and distribution.”

The chart benchmarks Equinix against a small, competitive cohort on a forward price-to-earnings (P/E) basis. Although Equinix is right in the middle between Digital Realty and Iron Mountain, a forward P/E of nearly 80 is by no means a bargain. The average forward P/E of the S&P 500 is only around 23.

There are a couple of important takeaways from these trends. First, even though Equinix and its peers are a bit pricey, investors appear to be placing a premium on the data center market compared to the broader market. This could suggest that data center stocks remain a compelling choice among AI investors.

Moreover, all three companies have experienced notable valuation expansion over the last several months. This trend could support the idea that the data center pocket of the AI realm is beginning to fetch more attention and is becoming an increasingly lucrative opportunity.

In the coming weeks, institutional investors such as Citadel will be publishing updated 13F filings for the third quarter. I would keep a keen eye on whether Citadel and others on Wall Street are adding or reducing positions in data center stocks.

As Fox-Martin alluded to, the AI story is still early, and demand for data processing and storage protocols should continue rising as AI needs become more robust. For now, I think Equinix stock is worth monitoring but I see opportunities to invest at more reasonable valuations down the road.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Digital Realty Trust, Equinix, Iron Mountain, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Billionaire Ken Griffin Just Increased His Position in This Data Center Stock by 704% (Hint: It’s Not Nvidia) was originally published by The Motley Fool