AI Investing Glossary
What is colocation in the data center industry?
Colocation is renting space, power, and cooling inside someone else's data center for your own hardware, rather than building a facility yourself. Colocation providers lease capacity to enterprises, cloud providers, and AI companies, and the AI boom has absorbed much of the available colocation capacity in major markets.
Why it matters for AI investors
Colocation occupancy and pricing are a clean read on data center scarcity: when AI buyers lease capacity years before buildings finish, providers gain pricing power. The distinction from hyperscale self-build matters, since colocation providers capture demand from every AI company too small to build a campus of its own.
Tracked stocks in this layer
The largest names in the Data Centers & Hardware category, ranked by market cap:
Market data as of the close on . Prices are end of day, not live.
Related reading
- What are AI infrastructure stocks? The 12 layers, explained · AI infrastructure stocks are the companies paid to build AI compute: chips, memory, networking, data centers, cooling and power. The 12 layers and the catch.
Frequently asked questions
How does AI change the colocation business?
AI racks draw several times the power of traditional enterprise racks, so providers are retrofitting halls for higher density and liquid cooling, and new builds are designed around AI loads from the start. Contracts have grown larger and longer, and available capacity in major markets is scarcer than at any point in the industry's history.
Related terms
See how this fits the whole picture in the Start Here guide, or browse the full glossary.