Baron Fund Bets on Equinix as AI Drives Data Center Demand

Equinix Inc. (NASDAQ:EQIX) closed at $1,057.26 per share on September 21, 2026, capping a 52-week gain of 31.62% and carrying a market capitalization of $104.32 billion. The stock has traded between $720.62 and $1,128.68 over the past year, according to the Q2 2026 investor letter from the Baron Real Estate Income Fund, which named the data center operator among its top five holdings for 2026.

The fund itself gained 12.18% on Institutional Shares during the second quarter, modestly outperforming the MSCI US REIT Index, which rose 11.84%. Morningstar ranks it the #2 real estate fund since its December 2017 inception.

Baron Capital, the fund's manager, wrote that a multi-year recovery in real estate is beginning to emerge despite elevated interest rates, housing affordability pressures, and AI-related disruption. The firm cited attractive valuations, accelerating M&A, favorable supply-demand dynamics, healthy balance sheets, improving debt conditions, and growing recognition of real estate as an AI beneficiary.

The Bull Case for Data Centers

Equinix operates a global network of data centers and interconnected ecosystems that enable the delivery of digital experiences and AI workloads. The Baron Real Estate Income Fund holds data center REIT positions in both Equinix and Digital Realty Trust, Inc.

"We remain encouraged by the long-term growth prospects for data centers," the fund stated in its Q2 2026 letter. "Data center landlords are benefiting from low vacancy, strong demand relative to supply, constrained power availability, rising rental rates, and significant pre-leasing prior to largescale expansions – an improvement over the historical norm."

The letter identifies several secular trends supporting the sector: IT outsourcing, rising cloud adoption, growing mobile and internet traffic, and AI-driven data demand.

"As data continues to grow exponentially, the need to process, transmit, and store it underpins long-term demand for data center space," the fund wrote. "Early adoption of enterprise AI is just beginning to emerge and may further accelerate existing trends by driving additional digital transformation investments as costs decline."

What It Means

Baron's thesis rests on a structural imbalance: constrained power availability and limited supply colliding with exponential data growth. If enterprise AI adoption accelerates as the fund expects, Equinix and Digital Realty stand to capture rising rental rates and heavy pre-leasing before capacity even comes online — a dynamic the fund calls a clear break from the sector's historical norm.