The AI Arms Race: Is the US Lead Over China Already Gone?

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**SPEAKER_2** (1:13)
This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Luke Guerrero.

**Luke Guerrero** (1:29)
Good afternoon, fellow investors and welcome to InvestTalk.
I'm your host, Luke Guerrero, and it is Thursday, August 6th, 202026 It honestly sounds pretty crazy saying that we're already well into August. It feels like 2026 is almost over, but none of that matters because each and every day we come here to InvestTalk in order to help educate you, to provide you with actionable material, to help improve your investment outcomes. But that being said, in just a bit, we'll talk about today's market performance and run down those show topics. Why don't we tackle this color question now?

**SPEAKER_4** (2:11)
Good morning. I have a question about DLR. D is in David, L is in Lazy, R is in Realty. DLR, what do you think about the stock? Is it a good time to buy?
Thank you.

**Luke Guerrero** (2:27)
DLR is Digital Realty Trust. They are the world's largest cloud and carrier neutral data center, REIT. They have just over 300 data centers. They are spread across 31 countries and just under 60 metropolitan areas. They have 5,000 customers, which includes every single hyperscaler. They are benefiting from a lot of this AI spending that has been pushing the market higher for quite some time. There's a reason why, even as rate expectations tick up, this REIT, remember REITs typically perform as bond proxies, REITs, utilities, staples. So if rates tend to go higher, what usually happens is REIT prices fall. That's been the case over the past three months, but year to date, this thing's up 24.47%. It's outperforming its industry by just over 10% on the year. Looks like it reported earnings, Q2 earnings, a couple weeks ago, two weeks ago. That was pretty good. I mean, they had record core funds from operation, which is the thing that you really care about when it comes to REITs. And you had, more importantly, I would say, from a market perspective, you had guidance being raised for the second consecutive quarter.
A lot of the big benefits to companies that are participating in AI CapEx, receiving that CapEx, is backlog. And I mean, they have a huge backlog. It's just under $2 billion.
And so with these records, you know, what has been going on here? I think that with the overall AI theme, right, you've seen a bit of a pullback in, some of those AI-adjacent names, certainly memory has been one of them. You're starting to see maybe a little bit of hesitation from the market with respect to, okay, are there bottlenecks out there? One, people say is memory, certainly, a situation in the Middle East that is hurting input materials for semiconductors could be a bottleneck. Another is a lot of people don't want data centers in their backyard. Now, is part of that drawdown that is another part of it, this thing is trading at a pretty expensive multiple compared to where it's been. I mean, its price to book value is nearly at an all-time high here. It's had a run. Is it just turning a bit back around? That's entirely possible. I think you're trying to get exposure to the AI theme with far less volatility and you're an income-focused investor. I think this company has a lot that is going for it. I worry that with a lot of the companies that are touched by that secular driver though, that structurally speaking, they've run up a lot, the market's a bit more hesitant, and AI infrastructure as a theme may see a bit of a rotation out of it over the next six months. So I hesitate to enter into a position here, not just because of its valuation concerns, but because you're seeing a bit of poor momentum and you've seen that over the past three months. That is Digital Realty Trust, ticker DLR.