- Citi analyst Michael Rollins noted data center stocks Equinix, Inc EQIX, Digital Realty Trust, Inc DLR, Cyxtera Technologies, Inc CYXT were down an average of >5% on July 1 on reports (including Financial Times) that an investor is "betting against 'legacy' data centers that now face growing competition from the trio of tech giants that have been their biggest customers..."
- Short-seller Jim Chanos betted against "legacy" data centers that now face growing competition from the trio of tech giants that have been their biggest customers.
- The giants included Amazon.com Inc AMZN Amazon Web Services, Alphabet Inc GOOG GOOG Google Cloud, and Microsoft Corp MSFT Azure.
- Chanos, known for predicting the collapse of energy group Enron, raised several hundred million dollars for a fund that will take short positions in U.S.-listed real estate investment trusts.
- Rollins does not see any new risks for the category. He believes the sizeable hyper-scale cloud customers will likely stay customers and competitors within the data center ecosystem as many enterprise firms seem likely to employ hybrid-cloud architectures.
- The concerns raised by the article do not meaningfully change his generally positive demand outlook.
- He prefers retail-centric data center assets that can differentiate their portfolios around ecosystems and high levels of connectivity (network & cloud).
- Buy-rated EQIX remains his top data center pick, while he maintained Buy on DLR and Neutral on CYXT.
- Price Action: EQIX shares traded higher by 1.47% at $666.65 on the last check Friday.
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