Key takeaways: What is Wall Street pushing? Blackstone and other alternative investment firms are packaging data center assets into public and private investment products. What changes are happening in the industry: Blackstone's BXDC is a listed real estate investment trust (REIT); Brookfield's data center service provider Csquare completed its IPO in July; Blue Owl is reportedly also considering launching a listed data center entity. What are the risks: Despite growing AI demand, investors still face project delays, power and permitting constraints, asset concentration, refinancing, and liquidity risks. On July 17, 2026, an aerial view of the 928-acre QTS Fayetteville data center campus in Fayetteville, Georgia, USA. Data centers have already sparked enormous division in American society. Wall Street's deep-pocketed investors are betting enthusiastically that artificial intelligence will become the economic engine of the future, while opposition among ordinary citizens continues to heat up. The computing infrastructure supporting Google Gemini, Meta's Muse, Anthropic's Claude, and OpenAI's ChatGPT is spreading across the United States, and financial institutions are pitching investors on the idea that AI infrastructure can serve as a real estate allocation segment to help diversify portfolios.

Overall, this type of alternative investment fund promises to let investors share in the returns from the physical infrastructure driving the AI economy, and is currently mainly aimed at institutional investors such as pension funds. But this trend is also beginning to seep into retail investors to a limited extent. Alternative investment giant Blackstone is leading the way, having established the Blackstone Digital Infrastructure Trust BXDC earlier this year, a brand-new real estate investment trust (REIT) listed on the New York Stock Exchange. In a May interview on "Squawk on the Street," a trust executive said: "We see this as an opportunity to take the entire mature data center market and build a proper listed vehicle in the public market."

A large number of newly built data center projects in the United States face shifting public opinion and policy winds, and some states have even introduced moratoriums on approvals, including New York and Texas. Blackstone's REIT mainly focuses on mature markets such as Northern Virginia and Dallas, which already had large-scale data center clusters long before the AI boom began. Pell said: "This is the lowest-risk way to participate." He added that Blackstone can carefully select data center assets from a market worth $300 billion and offer them to investors. BXDC listed in mid-May at an offering price of $20. But since listing, the fund's share price has fallen about 16%, closing below $17 on Thursday. Blackstone declined to comment further.

EQIX and DLR, two data center developers listed as REITs, have performed reasonably well over the long term, but their share prices have stalled since BXDC's listing. This year, the REIT sector has performed better than its historical norm in an environment of rising rates and higher bond yields. Real estate typically fluctuates sharply in such an environment, as borrowing costs rise and investors reassess income-producing assets. But most of the REIT sector's gains this year were concentrated early in the year, and after bond market pressure intensified, a large number of REIT assets saw selling pressure starting in August. On the company's latest earnings call, Pell said the opportunity in the sector is enormous, with the total addressable market potentially exceeding $1 trillion in the coming years.

Data centers account for a growing share of U.S. infrastructure spending. In fact, while infrastructure spending in most U.S. industries is declining, data center-related construction spending is growing against the trend. Blackstone is not the only alternative investment firm packaging data centers as an investment target. Blue Owl already operates a private digital infrastructure fund for qualified investors; the company is considering launching a listed REIT valued at up to $6.5 billion, folding multiple data center assets into the new fund. The company says it holds more than 130 data centers across 32 markets worldwide, with assets exceeding $18 billion. By comparison, Blackstone's BXDC has not yet deployed any capital. Blue Owl declined to comment. But its co-CEO Marc Lipschultz recently posted on LinkedIn that he is bullish on the sector, calling data centers one of the best long-term investment opportunities in decades with attractive risk-reward characteristics. "These projects have stable performance and lower credit risk. The contract terms include built-in protections, so even if a tenant leaves early, we can still recover the full return," Lipschultz said. Brookfield Asset Management BAM is not a REIT, but its data center service provider Csquare (CSQR) listed on the New York Stock Exchange as a standalone entity, completing its IPO in July. The stock has fallen nearly 16% since listing.

But this investment thesis is encountering strong headwinds that Blackstone did not face when it launched its fund: political opposition is growing rapidly. Gallup polling shows that a large number of Americans oppose building data centers near their homes, and this opposition is bipartisan; autumn polling this year shows that about two-thirds of people oppose it regardless of party affiliation. New York State introduced a data center ban, and Texas followed. Just a year earlier, Governor Greg Abbott had called Texas an AI "hub," but in August he ordered the state environmental commission to pause data center approvals while also requiring a grid connection audit. For investors, the risk is not just whether a project can be built; local and state political resistance could also slow or overturn projects whose returns have already been factored into fund assumptions. In late September, Oracle shares fell 4%. Oracle issued a force majeure notice for its New Mexico Jupiter project, part of the Stargate large-scale AI infrastructure project led by Blue Owl. Oracle said that if the project cannot begin operations as scheduled in 2028, it wants to delay related payments due to regulatory obstacles and local protests, but said the project as a whole is still proceeding as planned.

Globally, investors holding or financing data center projects also face obstacles. An Australian data center company backed by Nvidia and Blackstone saw its IPO fail due to insufficient investor demand. At the same time, macroeconomic volatility is beginning to feed through to AI capital spending. On Thursday, news emerged that OpenAI's revenue forecast was far below previous estimates, pressuring a range of AI-related names. Gettysburg College finance professor Sabur Mora said demand for cloud computing, AI, digital services, and data storage continues to grow, giving data centers long-term investment value. "High-quality assets can generate relatively stable rental income through long-term leases with major tech companies," Mora said. Potential benefits include ongoing rental cash flow, exposure to the structural growth of the digital economy, and diversification beyond traditional real estate. But he also noted that the industry is highly capital-intensive and heavily dependent on stable power, cooling systems, and network access. The AI boom can easily lead some investors to overlook risks. "Core risks include valuation bubbles driven by AI enthusiasm, high development and operating costs, tenant concentration among a few leading tech companies, and power supply constraints." Other potential hazards include technological obsolescence, refinancing risk, construction delays, and ongoing capital expenditure needs.

Data center risks beyond markets and politics. Patrick Datz, head of digital risk at insurance brokerage and risk advisory firm IMA, and Rachel Nixon, co-head of the data center business, said data center investment involves multiple variables. "On the non-market risk side, there are uncontrollable force majeure events such as natural disasters," Datz said, which is why data centers historically concentrated in Virginia's 'Data Center Alley,' where there are few disasters. But now projects are spread everywhere, exposing assets to more risks. "Assets can be forced offline at any time, and that is where insurance comes in." Nixon said: "Once availability declines and fails to meet the contracted uptime, disputes will follow. There are many risk points." Still, the two remain broadly bullish on the data center sector. "We are very bullish on this space," Datz added, noting that data center assets sold to investors typically undergo strict due diligence and come with $3 billion to $5 billion in insurance coverage. "The projects are carefully designed, not hastily built; and the insurers underwriting them do not act recklessly and adopt conservative risk controls."

Kalshi prediction market traders believe that despite the many risks, the U.S. AI data center construction wave will continue: there is a 75% probability that more than 5,100 data centers will be planned or operational by 2027 (currently about 4,700), up from just 60% two weeks ago. Retail investor participation remains limited for now. Even for Blackstone's REIT (BXDC), which trades like an ordinary stock, market data shows that its holders are still mainly institutions. But the trend toward opening more private products to retail investors may accelerate. The U.S. SEC chairman proposed rule changes last week to expand retail access to private markets, opening fund management models previously reserved for institutions and high-net-worth individuals to a broader set of investors. Experts warn that, as the Oracle incident shows, investors must be cautious with this new asset class, especially since such assets have traditionally been dominated by institutional buyers.

The first major problem is liquidity. If you expect data center investments to be like an ATM with cash available at any time, you will probably be disappointed. Andrew Taffer, president of the private markets business at wealth technology platform InvestCloud's Altic, said: "The underlying architecture of these investments was designed for a small number of institutions making large contributions, not for millions of retail investors making small investments." Taffer described it as a "post office model": the system is suited to slow, manually processed transactions and does not support continuous high-frequency retail trading. Before investing in non-exchange-traded public targets, such as REITs or REIT funds that are not redeemable daily, investors should fully understand redemption windows, liquidity limits, and how the underlying assets operate; holding fund units does not mean cash can be withdrawn immediately. The redemption turmoil between private credit fund managers and unit holders in 2026 has already proven that even professional investors can be trapped by such liquidity limits — many private credit funds also manage data center assets, and investors concentrated redemptions that year on fears of an industry crisis.

Overall, data center funds are suitable as a small, long-term allocation within a portfolio. Jake Falcon, CEO of Falcon Wealth Advisors, said investing in data centers and similar products should not be an impulsive decision. But he believes listed REIT products are suitable for many individual investors: "Because they have liquidity, I am less averse to them than private products." He added: "Individual investors need to understand these before investing in alternative funds at three times the level... Investors need to review their overall portfolio and ask themselves whether this investment is necessary to achieve their financial goals." He said that if they cannot judge, they should do more research or seek guidance from a fiduciary financial adviser.