Digital Realty Trust (DLR) is BofA Securities' top data center pick for 2025, driven by its strong bookings pipeline, expected resurgence in core FFO per share growth in 2025 and 2026, and its substantial exposure to artificial intelligence training, the brokerage said in a note Wednesday.

BofA said Digital Realty is in a recovery phase after years of challenges, including poor leasing spreads and dilutive acquisitions. The explosion in AI demand, coupled with firm pricing power amid a tight supply-demand environment, positions the company to capitalize effectively.

The brokerage projects mid-single-digit core FFO per share growth in 2025, rising to high-single-digit growth in 2026. AI training demand, which currently accounts for about half of wholesale bookings, has been a key driver of Digital Realty Trust's performance, contributing to record bookings in Q1 and Q3 of 2024.

Management expects the strong demand to continue, supported by an elongated book-to-bill timeline averaging 15 months. New revenue-generating supply from these bookings is anticipated to come online throughout 2025 and 2026, further accelerating growth.

While BofA's revenue and core FFO per share estimates for 2025 and 2026 remain below Street expectations, the brokerage noted that these estimates are likely biased upward as Digital Realty continues to capture additional demand.

Digital Realty's hyperscale and wholesale exposure make it well-positioned to capture opportunities in AI training and related markets, according to the note.

BofA raised its price target on the company to $205 from $195 and reiterated its buy rating.

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