So, you want to make money in AI?
I don’t blame you … I do, too.
There’s just one problem.
AI stocks have been running hot.
In the past year, shares of Nvidia are up 233%, Palantir is up 193% and Palo Alto Networks soared 133%.
If you’ve invested in these stocks, congratulations. You’ve made a lot of money.
If not, you may be wondering if you missed the move in AI. If all the biggest gains are gone.
I don’t think so.
I think some of the greatest gains are in the days ahead.
Today, I want to show you a unique way to make money in AI — one that is at the crux of AI’s 38% annualized growth between now and 2030.
A play that allows you to become … an AI landlord.
And it all starts with this:
This nondescript building provides the backbone for AI technology.
You see, there’s an AI land boom underway in America.
It’s happening across the country.
Some of the most significant parts of the AI land boom are happening in places like Texas, Arizona and Florida.
But it’s not just limited to sunbelt states, where millions are moving.
They’re near major metro areas, including New York City, Washington D.C. and Silicon Valley.
This boom isn’t really about the land itself. Instead, this boom plays to AI and its increasing demand for the real-world space and resources needed to operate.
AI Is Just Starting to Get Amazing
Today, AI is doing some fantastic things.
For instance, OpenAI just released a video generator named Sora.
Using a text prompt, you can ask Sora to create a short video.
Simply enter a brief description of what you want to see. That can include a setting and characters. Sora then puts it together in a life-like video.
Our resident futurist, Ian King, has been looking into the Sora text-to-video model.
You can see one of the results in this video here:
(Click here to view the full video.)
Imagine being able to have AI create a custom movie while you’re at work. It won’t be long before that’s a reality. You may even be able to include the likeness of a deceased actor.
I wouldn’t want to be a Hollywood writer or executive right now. AI programs like Sora could put a permanent dent in the multi-billion-dollar entertainment industry.
And that’s just one new AI tool.
But as awesome as Sora is, it’s got a problem.
The computing power necessary to pull it off is massive. That takes hardware, time and data to put together.
Growing Pains: Physical Location Is Necessary for Powering the AI Boom
For AI to be effective and even improve from the fantastic things it’s starting to do now, the data required to run AI programs has to happen somewhere in the real world.
There needs to be a space with plenty of hardware capable of crunching the data behind the scenes.
We’re talking about the semiconductor chips made by Nvidia … but also servers and power are needed to tie it all together so that software by companies like Palantir and Palo Alto can make it all run fast and secure.
These places require tremendous power. And space.
These places are known as data centers.
Without them, AI systems wouldn’t be able to do a fraction of what they’re capable of today.
They’re what’s behind the AI land boom. More importantly, they’re creating a class of AI landlords.
Fortunately, it’s not too late to become one yourself.
The Big Bucks Behind AI’s Big Data Needs
To get a sense of how good it is to run a data center, just consider one company that is already doing business with major players like Nvidia, Google and Microsoft … as well as Oracle, Amazon and IBM.
Combined, this AI landlord is raking in $5.47 billion a year from these major customers.
The growth here is fantastic. That’s up 79.3% since 2018 alone. And the AI trend is just getting started.
Yes, in a world where AI stocks can soar — and drop — quickly, steady 10% returns may not sound that exciting.
But if you want to play this long-term trend and do so in a way that puts cold, hard cash into your pocket, being an AI landlord may be right for you.
This company? It’s called Digital Realty Trust (NYSE: DLR).
It’s hyper-focused on creating world-class data centers catering to today’s high data needs, particularly those in AI.
Digital Realty operates over 300 facilities. It’s on six continents and in 25 countries, concentrated in over 50 metro areas.
In short, this company is where the action is. That’s what we want to see when investing in real estate.
As a real estate investment trust (a REIT), Digital Realty trades much like a stock. However, it is required to pay out 90% of its earnings to its shareholders.
DLR currently pays a dividend yield of 3.5%.
I admit, that’s not that exciting.
But the real story is the company’s growing earnings and revenues. Rising profits translate to higher dividends over time. And that translates into a higher share price. It’s a win-win-win.
The dividend has already grown an average of 4.57% over the past ten years.
That may not sound like much. But data center REITs have a 10-year average increase of 3.22%.
So DLR’s dividend growth is 42% better than the sector. And that edge can add up to much bigger profits over time.
Remember, Digital Realty is poised to profit from the AI boom.
It doesn’t matter which company takes the lead. Their top 20 customers, who account for about half their revenues, are a “Who’s Who” of industry leaders.
AI-Fueled Growth Will Push Digital Realty’s Value (And Dividends) Higher
Digital Realty is working on joint ventures for future projects.
That will allow DLR’s top customers to get customized data centers and spread the operational risk around. It also means putting up less capital while still growing the business.
In December, DLR inked a deal to create a $7 billion venture with infrastructure asset manager Blackstone (NYSE: BX).
Blackstone will take an 80% stake in the joint venture, which will create four hyperscale data center campuses across three metro areas. DLR will also receive fees for managing the sites once they’re operational.
In other words, DLR isn’t just a landlord. It’s a property developer. That offers higher rewards but at a higher risk.
Fortunately, they’re spreading the risk around with a joint venture so that they have a high chance of success.
That’s what I love to see. A good income story … combined with being in the right place and at the right time.
For AI investors, this could be the right time.
Data center companies haven’t been as strong performers as other AI plays. Part of that is the slower growth by design.
Another part is the rising interest rates we’ve had over the past year. Real estate requires considerable capital, and rising rates tend to weigh on the space.
Digital Realty has $19 billion in outstanding debt. But the debt maturities are spaced out. And with a market cap of $43 billion, they have more than twice as much equity as debt. That’s like having a $250,000 mortgage left on a $750,000 home.
Add it all up, and we have a winning real estate play. Lower interest rates later in the year could light a fire under shares and send them soaring higher.
Even if shares move up more slowly and steadily, investors will still be collecting a 3.5% dividend. That’s about 75% more income than owning the S&P 500 index, which yields about 2%.
Some AI companies will take big risks … and succeed. Others will swing for the fences and miss.
No matter what happens with those companies from here, Digital Realty Trust will continue to benefit from AI, no matter which other companies grab the current headlines.
And, with a current dividend payout of $4.88 per year, anyone can start investing in DLR and quickly build up a respectable income.
With Digital Realty, it doesn’t just pay to be a landlord now. The real value will come from higher share prices and higher income over time.
While I love the idea of being an AI landlord … I can’t take the credit.
That’s because it’s an idea that Ian King has explored in Strategic Fortunes.
Since recommending Digital Realty last June, the position is up over 41%.
And Ian’s up another 150% in an AI play from last February…
And a whopping 297% in a chipmaker play he bought in February 2020.
If you want to learn about Ian’s latest research into “AI Energy” (a potentially $40 trillion market disruptor), go here to get all the details.
If you already are a Strategic Fortunes subscriber, you have access to this information. But it may be time to kick your returns up a notch with a subscription to Ian’s Extreme Fortunes service.
Go here to learn more about Ian’s top AI biotech stock for 2024.
Given the continuing boom in AI, becoming an AI landlord now looks like an attractive opportunity.
Aaron James
CEO, Banyan Hill, Money & Markets
