Deep Dive: The $710 Billion Data Center Arms Race — Why AI Infrastructure Has Entered 'Hyperdrive' and What It Means for Investors

The engine driving the data center boom is a capital expenditure cycle unlike anything the technology industry has ever witnessed. The top five hyperscalers have collectively committed $710 billion in planned capex for 2026, according to JLL's analysis. The actual figures from recent filings make the scale of this buildout unmistakable.

Alphabet led the charge in 2025, spending $91.4 billion in capital expenditures for the full year — a 74% increase from $52.5 billion in 2024, which itself was a 63% jump from $32.3 billion in 2023. Amazon poured $131.8 billion into property, plant, and equipment in 2025, up 59% from $83 billion the prior year. Meta nearly doubled its capex to $69.7 billion from $37.3 billion. Microsoft, on its fiscal year ending June 2025, spent $64.6 billion, up 45% from $44.5 billion the year before.

These are not incremental increases — they represent a structural shift in how Big Tech allocates capital. The vast majority of this spending is directed at data center construction and the GPU clusters needed to train and run AI models. Nvidia's latest quarterly revenue of $68.1 billion (for the quarter ending January 2026), up from $57 billion the prior quarter and $46.7 billion the quarter before that, provides the clearest demand signal: every dollar of hyperscaler capex flows through a supply chain that starts with chips and ends with concrete and kilowatts.

Perhaps the most striking finding in JLL's report is that data center vacancy rates have held at just 1% for two consecutive years — an extraordinary level of tightness for any real estate asset class. For context, the national office vacancy rate in the U.S. hovers near 20%, and even the tightest industrial markets rarely dip below 3-4%.

What makes the situation even more compelling for the sector's bull case is that 92% of the capacity currently under construction is already pre-committed by investment-grade tenants. This means the enormous pipeline of new builds is not speculative — it's contracted. "Record-low vacancy sustained over two consecutive years provides compelling evidence against bubble concerns," said Andy Cvengros, executive managing director at JLL, "especially when nearly all our massive construction pipeline is already pre-committed by investment-grade tenants."

This pre-commitment dynamic is critical for understanding why vacancy is likely to remain tight through at least 2030. Major cloud and AI customers are locking in capacity years in advance, driven partly by the four-year average timeline for grid connections. The result is a market where demand visibility stretches far into the future, giving landlords and developers a level of revenue certainty that is rare in commercial real estate. Record financing of $75 billion flowed into the sector in 2025, as lenders competed to gain exposure to what they see as a generational infrastructure buildout.

For decades, Northern Virginia's "Data Center Alley" in Loudoun County has been the undisputed epicenter of the global data center industry. That era is ending. JLL's report shows that roughly 64% of the 35-gigawatt construction pipeline now extends beyond mature markets like Virginia, with Texas poised to claim the top spot as the world's largest data center market.

The shift is driven primarily by power availability. Grid connection timelines average four years or longer in established markets, forcing hyperscalers to look elsewhere. Texas offers a deregulated energy market, abundant land, and — critically — a power grid with more available capacity, even after the well-documented challenges of the ERCOT system. Other emerging markets include areas in the Southeast, Midwest, and Pacific Northwest that can offer faster interconnection to the electrical grid.

This geographic expansion is also creating new investment opportunities. "A lot of companies are considering building onsite power generation," said Andrew Batson, JLL's global head of data center research. "It reduces risk. Ultimately, though, the overwhelming majority of operators want grid connectivity long term." The willingness to invest in captive power generation — including natural gas turbines, nuclear micro-reactors, and even dedicated renewable installations — underscores how serious the power constraint has become. For real estate investors, the migration beyond Virginia means evaluating land, utility access, and regulatory environments in markets that were irrelevant to data center calculations just three years ago.

The two largest publicly traded data center REITs — Equinix (EQIX) and Digital Realty (DLR) — offer the most direct public market exposure to this buildout, and both have seen their valuations climb significantly.

Equinix trades at $946 per share, up roughly 35% from its 52-week low of $701, with a market capitalization of $93 billion. The company's revenue has grown steadily throughout 2025, from $2.23 billion in Q1 to $2.32 billion in Q3 and $2.42 billion in Q4, reflecting consistent demand for its global colocation and interconnection platform. Analysts project quarterly revenue to climb toward $2.68 billion by early 2027 and $2.88 billion by the end of that year. Notably, Equinix and Canada's CPPIB are reportedly near a deal to acquire atNorth, a pan-Nordic data center operator, signaling continued expansion into European markets where AI demand is accelerating.

Digital Realty, trading at $176 with a $60.6 billion market cap, has delivered even more dramatic revenue growth, from $1.41 billion in Q1 2025 to $1.71 billion in Q4 — a 22% increase in just nine months. The company is expanding its innovation lab network to Singapore, Japan, and London to help customers test AI and hybrid cloud infrastructure. Analyst estimates project DLR's quarterly revenue to reach $1.74 billion by early 2027 and $1.86 billion by year-end 2027. Both stocks trade at premium valuations — Equinix at a P/E of roughly 69x and DLR at 49x — reflecting the market's expectation of sustained, above-average growth well into the decade.

For all the bullish momentum, the data center industry faces a constraint that no amount of capital can solve quickly: power. Grid connection timelines averaging four years mean that even approved and financed projects face multi-year delays before they can begin operations. This infrastructure bottleneck is the single greatest risk to the sector's growth trajectory.

The numbers involved are enormous. A single large-scale AI training data center can consume 100 megawatts or more — equivalent to the electricity needs of roughly 80,000 homes. Multiply that by the thousands of facilities planned or under construction, and the demand on the U.S. electrical grid becomes staggering. This is why Nuveen, a global real estate development firm, is taking a "build-and-sell" approach rather than holding long-term. "There really is quite a bit of demand, and we think that in the next five years there's not an oversupply situation," said Chad Phillips, Nuveen's global head of real estate. "There's going to be evolution pretty quickly, and so that's why we're looking at sort of shorter-term builds and then sells."

The power challenge creates a two-speed market. Operators who can secure grid access — or who invest in on-site generation — will be able to deliver capacity and command premium rents. Those who cannot will face costly delays. For investors, this means evaluating data center companies not just on their lease books, but on their power procurement strategies and relationships with utilities. The companies best positioned to navigate the grid bottleneck will likely generate the highest returns over the next five years, while the power constraint itself may act as a natural moat, limiting oversupply and supporting pricing power for established operators.