“You can't build it fast enough.” This concise assessment from Andrew Power, President and CEO of Digital Realty, cuts through the noise surrounding the artificial intelligence boom, crystallizing the challenge facing the foundational infrastructure market. Power, leading the second-largest data center Real Estate Investment Trust (REIT) globally, recently spoke with CNBC’s Diana Olick on the Property Play program about the unprecedented, urgent demand for digital infrastructure and whether the capital flowing into the sector represents a bubble akin to past tech frenzies. His core argument is sharp and clear: while the technology atop the infrastructure may be volatile, the infrastructure itself is a long-term, hard-asset play insulated by insatiable demand.
Digital Realty, a $52 billion market cap company with a 20-year history as a public data center REIT, operates across 50 metropolitan areas on six continents, catering to a diverse clientele spanning digital transformation, cloud computing, and, increasingly, artificial intelligence. Power emphasized that the current demand surge is not speculative, noting that major customers—including hyperscalers like Amazon, Microsoft, and Google—are signing "long-term contracts, 15-year leases for that capacity with urgency." This contractual certainty, coupled with the high credit quality of these major clients, provides a significant layer of insulation against market shocks that might affect the volatile stock prices of the technology companies themselves.
The conversation naturally addressed the perennial concern that technological efficiency, governed by Moore’s Law, could eventually shrink the physical footprint required for computing, leading to vacant data centers. Olick posed this question directly, comparing the potential data center oversupply to "vacancies in housing." Power countered this argument by invoking Jevons Paradox, explaining that while technology becomes smaller, cheaper, and more efficient, the increased efficiency leads to vastly increased consumption and new applications. He drew a historical parallel to the advent of the locomotive: while it replaced horse-drawn carriages, it opened up entirely new logistical demands for goods and people, ultimately spurring greater infrastructure investment. Similarly, AI’s efficiency doesn’t reduce the need for data centers; rather, it exponentially increases the total volume of computation required. This phenomenon means that “Moore’s Law is happening, things are innovating, getting smaller, but it’s losing out to the new innovation that’s being built.”
Power stressed that Digital Realty’s business model is inherently protected because it serves as the foundational, shared infrastructure—the "roads and bridges"—for the entire digital economy. Unlike the technology companies, which are in an "arms race of the technology," Digital Realty wins regardless of which specific chip or platform dominates. The company’s diversification across 5,000+ customers in 50 metro areas ensures that even if one hyperscaler falls, the infrastructure remains essential for the others, insulating the asset. He noted that even the hyperscalers, despite their aspirations to own and build their own data centers, are still landing 50% of their needs with providers like Digital Realty because the speed and scale required are simply too massive to manage entirely in-house.
A critical point of friction in the current data center expansion is the escalating concern over environmental impact, particularly related to electricity and water usage. Power acknowledged the pushback but framed Digital Realty's approach as proactive and cooperative. He pointed out that data centers are consistent, high-percentage users of power—they don't take holidays or react wildly to weather like residential users—making them ideal partners for utility grids. Digital Realty is actively investing alongside utilities to harden and improve the grid, effectively helping "float the bill" for infrastructure upgrades that benefit the entire community. Furthermore, he noted that the vast majority of their global portfolio (operating 3 gigawatts, with 5 more in the pipeline) is already 90% offset by green power sources through power purchase agreements (PPAs). Addressing water consumption, often a misunderstood metric, Power stated that almost all of their 300 data centers utilize waterless or closed-loop water systems, keeping overall water usage for the massive global portfolio equivalent to less than 18 California golf courses.
The enduring takeaway for founders, VCs, and analysts is that the demand driving the data center sector is structural, not cyclical. The explosive growth of AI and cloud adoption has ensured that the physical infrastructure underpinning these technologies remains a long-term, durable investment. Digital Realty’s strategy is built on serving this relentless demand at a fundamental level, ensuring that as technology continues its rapid evolution, the need for reliable, massive-scale digital infrastructure only grows.
