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Data Center ETFs: An Introductory Guide to Boosting Your Portfolio
Data center ETFs can help diversify your investments. Learn how they work, their benefits, and how to go about choosing the right fund for your portfolio.
5 Min Read
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If you want to invest in the data center industry but don’t want to commit to any one data center company, buying data center ETFs is a good option to explore.
Data center ETFs provide broad exposure to the data center market, allowing investors to profit when the industry as a whole grows – as it seems poised to do for the foreseeable future, thanks to trends like AI and the increased data center demand it generates.
That said, finding and purchasing data center ETFs can be tricky. Relatively few ETFs have major holdings linked specifically to the data center market, and most of those that do invest in data centers are just one component of broader strategies – such as investing in commercial real estate.
To provide some high-level guidance on data center ETFs and data center REIT ETFs, this article breaks down everything investors need to know about this type of fund, including how data center ETFs work, their pros and cons, and a listing of the main data center ETFs available today.
What Is a Data Center ETF?
A data center ETF is a type of Exchange-Traded Fund (ETF) that focuses on the data center industry.
An ETF can include a mix of financial securities – including stocks, bonds and/or commodities – linked to various companies (although most data center ETFs primarily hold stocks). The main goal of ETFs is to provide an easy way to invest in multiple businesses at once, without having to purchase stock in each organization directly. This allows investors to diversify their investments.
The Benefits of Data Center ETFs
All ETFs provide an easy means of diversifying investments and balancing risk. However, data center ETFs may be particularly attractive to investors because the data center industry is complex, and deciding which specific companies to invest in can be tough.
Few individual investors have time to research information like which regions a particular data center company is currently expanding in or how much a colocation provider charges for space.
Data center ETFs solve this challenge by letting investors outsource the task of choosing specific investments to a third party – specifically, the company that manages the ETF. It’s the job of ETF managers to do the research necessary to make informed data center investment decisions.
A data center ETF is a type of Exchange-Traded Fund that focuses on the data center industry.
Should You Invest in Data Center ETFs?
Investing in data center ETFs makes sense if you believe the data center industry as a whole will continue to grow and generate profits, and you want to invest without having to choose specific companies.
On the other hand, buying stock in individual data center operators may be a better option if you are an industry observer with strong opinions about how each business is likely to perform. Likewise, if you want maximum control over your investments, an ETF is less attractive because you can’t change the holdings within an ETF. Only the ETF manager can do that.
As ever, readers should always consult with a financial advisor to ensure their investment choices align with their personal financial goals and circumstances.
Main Data Center ETFs on the Market Today
As mentioned, the number of data center ETFs is currently limited, but there are several options on the market today. These include:
Global X DTCR
As of 2024, the Global X Data Center and Digital Infrastructure ETF (DTCR) is the only ETF that focuses directly on the data center industry. Its holdings are primarily in stocks, with shares of data center operators like Equinix and Digital Realty ranking high on the list. The ETF also invests substantially in companies that operate wireless infrastructure.
If you want an ETF tied specifically to the data center industry, DTCR may be your best option.
iShares IDGT
The iShares US Digital Infrastructure and Real Estate ETF (IDGT) isn’t a data center ETF per se, but it comes very close. It invests in many of the same data center and wireless infrastructure companies as DTCR, but it also includes holdings in networking companies like Cisco and Fastly.
IDGT may be a good choice if you want a data center REIT ETF that will give you substantial exposure to the data center industry but with some additional diversification.
iShares IDAT
iShares’ Future Cloud 5G and Tech ETF doesn’t currently own shares in any major data center operators. Instead, its holdings center on companies in the cloud, networking, and virtual infrastructure space.
This makes IDAT a strong contender if you believe that future growth in the data center industry won't center on the expansion of data centers themselves as much as on digital services and infrastructure running on top of those data centers.
BlackRock BKRDX
The iShares Developed Real Estate Index Fund (BKRDX) invests in several large data center companies as part of its strategy to track the real estate market in general in developed countries.
Although not specifically a data center REIT ETF, since data center operators own a lot of real estate, they feature prominently in this fund’s holdings. For example, Equinix is currently in second place on BKRDX’s list of weighted investments.
BKRDX also invests in a variety of other companies not linked to the data center industry. This makes it a fund potentially worth considering if you want an investment that’s weighted significantly toward data centers but also provides broader exposure to a wide array of other types of businesses that own substantial real estate.
Read more of the latest data center investment news
Data Center ETFs: Investing in the Future
If you’re new to the data center investment scene, buying an ETF can be one of the simplest ways to invest in the future of the industry while balancing risk.
With several ETFs available that include major holdings in data center companies, there’s more choice than ever to find one suited to your investment goals.
Note: This article is for informational purposes only and should not be considered financial advice. Always consult with a financial advisor to ensure any investment decisions align with your personal financial situation and objectives.
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