Goldman makes this stock its top pick for the fourth quarter on AI data center boom

Digital Realty Trust is a key play on artificial intelligence data centers entering the fourth quarter as interest remains strong in the space, according to Goldman Sachs. Analyst James Schneider has a buy rating and top pick designation for the data center owner. Schneider raised his price target by $10 to $185, which now reflects upside potential of more than 13% over Wednesday’s close. “We believe most investors are constructive on DLR given strong fundamentals stemming from strong AI demand from hyperscalers, as well as tight power supply constraining power provisioned to new datacenter projects,” Schneider wrote to clients in a Thursday note. Schneider said the Texas-based company has high expectations to live up to when reporting earnings next month. Specifically, traders are looking for upside to leasing and pricing metrics in the third quarter, he said. But the stock should be able to outperform if management offers visibility on the sustainability of demand or current pricing, according to Schneider. More optimistic comments on demand strength for future joint ventures could also bode well for shares, the analyst added. More broadly, the data center group should be able to keep rising due to strong capital expenditures from hyperscalers, Schneider said. While investors are long on data center stocks, they’ve recently turned more neutral on tower-focused names, he said. Digital Realty Trust shares rose modestly in early trading on Thursday. The stock has climbed about 22% this year. DLR YTD mountain Digital Realty Trust, year to date