Demand for data center capacity and internet infrastructure is outstripping the pace of new construction, creating a favorable environment for U.S. communications infrastructure companies for the moment, according to analysts. However, that mismatch between demand and supply is expected to moderate over the next few years as a wave of projects come online.
Analysts tracking capital deployment tied to rising needs for computing power say more than $1 trillion has been committed to physical infrastructure in the current cycle. Much of that investment is earmarked for large-scale data center construction intended to support growth driven by artificial intelligence and expanded cloud services.
That surge in demand is currently expanding faster than builders can add capacity. Bernstein forecasts that global data center demand will grow at a 13% compound annual growth rate through 2028, a pace the firm says will keep pricing elevated and vacancy rates low in the near term.
Bernstein's supply-and-demand outlook anticipates a market-wide vacancy trough of roughly 4.9% in 2026. As the new facilities under construction are completed, the firm expects vacancy to climb above 10.5% by 2028, reflecting the absorption of new supply.
Within the data center and communications infrastructure complex, Bernstein signaled a preference for companies focused on enterprise customers over those that concentrate on hyperscale cloud providers. The brokerage named Digital Realty as its top pick, pointing to its stronger enterprise growth profile while competitors shift greater capacity toward hyperscalers.
Equinix earned an Outperform rating in Bernstein's initial coverage. Analysts said Equinix's relatively slower build cadence could position the company to solidify its standing in enterprise-focused data centers as fresh projects from the broader market come online.
Bernstein took a more cautious stance on CoreWeave, assigning an Underperform rating. The analysts argued that CoreWeave's "neocloud" model carries specific risks if hyperscale cloud providers transition from partner to competitor roles, a dynamic that could constrain long-term growth. The firm projects CoreWeave's growth to slow sharply in 2027 and 2028, a shift that could weigh on cash flow and margins.
Telecom tower operator Crown Castle entered Bernstein's coverage with an Outperform rating. The firm cited strengthening revenue prospects and growing confidence in Crown Castle's turnaround initiatives as the basis for the positive view.
Implications
The near-term market environment is characterized by strong pricing power and low vacancies for data center owners as demand outpaces the current development pipeline. That dynamic benefits owners and operators of communications infrastructure, particularly those with enterprise-focused portfolios. Over time, the influx of new supply is expected to loosen that tightness, increasing vacancy and altering pricing dynamics by 2028.
What remains uncertain
Key uncertainties include the pace at which announced projects are completed and absorbed, the extent to which hyperscale cloud providers influence market allocation between enterprise and hyperscaler capacity, and the degree to which those developments will pressure cash flows and margins for certain companies.