Are data centre stocks still a good bet for investors in 2026?

SINGAPORE – In generative AI, most model training run and inference requests ultimately pass through a data centre, a warehouse-like facility housing servers, power equipment and cooling systems.

Training involves learning from vast datasets, while inference occurs when a model generates an output or answers a user prompt.

As AI spending accelerates, the question for ordinary investors is whether the companies that own and operate these facilities still offer attractive returns.

Twenty years ago, a data centre was essentially a large server room. Today, facilities range from single-tenant campuses for hyperscalers, such as Amazon Web Services and Google Cloud, to co-location sites where dozens of companies lease space for their servers and networks.

While traditional air cooling for these electricity-guzzling centres remains widely used, new liquid cooling technology is becoming the gold standard, as it allows more powerful servers to operate in less space with better energy efficiency.

But as liquid cooling is capital-intensive and complex, data centres of the future could turn out products with a hybrid approach.

Data centres are expensive infrastructural assets. As a result, Mr Benjamin Chow, head of private assets research for Asia at MSCI, said in a research note on 2026’s real estate trends that investors should watch data centre companies’ equity and debt fund-raising activities, and how quickly their assets lose value over time.

Real estate investment trusts (REITS) that lease data centres to hyperscalers could also face risks if tenants end their leases, leaving them with buildings fitted with outdated cooling and electrical systems.

Obsolescence, noted Mr Chow, is the feared word.

Regulatory costs are another area that investors should heed.

In February, the Singapore Government said it plans to move beyond advisory guidelines and introduce legislation covering energy use, cybersecurity and reporting standards for data centres in 2026.

The proposed Digital Infrastructure Act will apply to new facilities, while existing data centres will have to comply when they undergo upgrades.

Governments in Europe and several US states are taking a similar approach, either introducing specific rules for data centres or bringing them under broader energy-efficiency regulations.

Despite these challenges, real estate services firms such as JLL estimate that data centre capacity will almost double from roughly 103 gigawatts (GW) in 2025 to about 200GW by 2030.

The Asia-Pacific is one of the main engines of the global build-out, with capacity in the region expected to expand from about 32GW in 2025 to 57GW by 2030, it said. 

CBRE forecasts that global hyperscalers will deploy more than US$400 billion (S$511.6 billion) of capital in 2026, with the Asia-Pacific region a key recipient of the funds. 

Cushman & Wakefield said regional growth over the next five years would be “robust”, projecting that the top four largest data centre markets – Australia, India, Japan and Malaysia – will grow an average of 26 per cent a year.

Vietnam, Thailand and the Philippines are reported to be also getting into the game.

While the sector can be expected to grow, investors should be aware of other factors when investing in data centres.

In a note in February, consultancy McKinsey & Company highlighted that training models requires large data centres with powerful, high-density computing systems. In contrast, inferencing is increasingly pushing infrastructure closer to urban areas – where users are – to reduce delays, improve network connections and use energy more efficiently.

“By 2030, inference will surpass training to become the dominant workload in AI data centres, representing more than half of all AI compute and roughly 30 to 40 per cent of total data centre demand,” McKinsey said.

With expectations that artificial intelligence will be widely used in technologies such as autonomous vehicles, industrial systems and humanoid robots, demand for inferencing is likely to grow.

Separately, governments and companies are raising demand for data stored within national borders amid rising geopolitical tensions.

Therefore, investors should pay close attention to the locations and types of data centres they invest in.

In 2025, investors grew cautious about data centres after big tech companies unveiled huge infrastructure spending plans, fuelling concerns about oversupply and valuation risk. In 2026, analysts expect a more measured but still robust pace of expansion.

Investors in Singapore can buy into data centre REITs on the Singapore Exchange through Keppel DC REIT, NTT DC REIT or Digital Core REIT. 

There is also Mapletree Industrial Trust and CapitaLand Ascendas Trust, which balance risks with industrial real estate assets, while blue-chip stocks like Singtel and ST Engineering also offer data centre exposure.

Those seeking a pure play on data centres can look to US-listed companies such as Equinix, which is guiding annual revenue growth of 10 per cent to 11 per cent; or Digital Realty, at between 8 per cent and 10 per cent.

Both firms expect earnings before interest, taxes, depreciation and amortisation to rise by double-digit percentages in the same period.

For a wider risk spread, there are exchange-traded funds such as the US-listed Global X Data Center & Digital Infrastructure Fund, which gives investors exposure to companies building, owning or supporting the data centre ecosystem worldwide.

Before buying, among other metrics, always check the firms’ guidance on performance, distribution payouts, leverage, occupancy, pipeline, net asset value and lease tenures.