Billionaire Ken Griffin Just Increased His Position in This Data Center Stock by 704% (Hint: It's Not Nvidia)

In This Article:

Semiconductor stocks have been some of the biggest beneficiaries in the ongoing artificial intelligence (AI) revolution. Chipsets known as graphics processing units (GPUs) are important for developing generative AI, and companies including Nvidia, Advanced Micro Devices, and Taiwan Semiconductor have emerged as early winners in the GPU realm so far.

IT infrastructure is an area tangential to the GPU landscape, and I continue to think it's going overlooked. GPUs are stored in data centers, so wouldn't it make sense that as demand for these chips rise, so will the need for data center services?

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free ?

Well, apparently billionaire investor Ken Griffin of Citadel Advisors might think so. According to Citadel's most recent 13F filing, the fund increased its position in data center stock Equinix (NASDAQ: EQIX) by 704% during the second quarter -- bringing its position to roughly 564,000 shares.

I'll outline why I see Equinix as an under-the-radar opportunity in the AI space, and will assess if I think the stock is a good buy right now.

How is AI demand impacting Equinix?

One of the most popular applications in AI right now is the large language model (LLM). LLMs such as ChatGPT, Claude, and Gemini have loads of features -- from image creation, generating software code, or generic search functionality, these models are changing the way people interact in the workplace and online.

And while LLMs have the ability to generate answers to your queries almost instantly, the underlying build supporting these models is far more complex than you might realize. Generative AI that can process questions and perform tasks quickly takes an incredibly long time to develop. The reason is that these machine learning (ML) applications undergo ongoing training and inferencing testing. Another way of looking at it is that AI models are constantly processing vast amounts of data through complex algorithms -- indeed, a big tailwind for the data center market.

During Equinix's last earnings call, CEO Adaire Fox-Martin made an interesting analogy when comparing the rise of AI to that of cloud computing a decade ago. He stated that "in the near term, AI training workloads are driving significant demand" while inference demand is also "beginning to take shape."

GPUs inside a data center.
Image source: Getty Images.

Why am I bullish on the long-term outlook?

Today, cloud services have become a multibillion-dollar opportunity for tech stalwarts such as Amazon, Alphabet, Microsoft, and Oracle. One of the reasons for this is that demand for digital infrastructure has risen in parallel with businesses investing more heavily into data to make more informed, efficient decisions.