Sep. 21 at 11:01 AM
$DLR Digital Realty initiated with a Buy at Rothschild & Co Redburn
Rothschild & Co Redburn initiated coverage of Digital Realty with a Buy rating and
$227 price target. While the equity narrative across the generative AI infrastructure "remains firmly bullish," credit markets are "beginning to price risks that equities largely ignore," the analyst tells investors in a research note. Rothschild believe the credit market "is sending the more important signal." The firm says the true economic leverage of the hyperscalers, which support much of the infrastructure buildout, is materially higher once off balance sheet commitments are included.
This reduces their capacity to continue backstopping the next phase of investment, contends the analyst. Rothschild is negative on the neoclouds, where it believes earnings and valuations are "cyclically inflated." It is neutral on AI infrastructure. Traditional real estate investment trusts "stand out as underappreciated second-derivative beneficiaries of the buildout," adds the firm.
