Special Report

ASI Profit and Protect Playbook Part 2: Hold for Income

Now that you’ve established a position in AI stocks that have high growth potential, it’s time for the second part of the plan.

Every investor needs a safety net, and in the business of AI, there’s no better industry to create one than the data center industry.

It’s obvious if you think about it. Data centers are the “physical epicenter of AI,” literally storing all of the huge amounts of information that AI sifts through in order to do its job. They’re going to be as essential for AI as asphalt producers are for roads and highways.

And even better, because data centers are a form of real estate, many of the assets in this sector offer consistent dividends, which are perfect for establishing a rock-solid income stream that will pay out regardless of what happens elsewhere in AI.

These three stocks are, in my mind, the best airtight safety plays in AI right now.

AI Income Stock #1: Iron Mountain (IRM)

Iron Mountain has been one of the kings of secure data storage since its founding in 1951. Originally created to store paper records for government agencies and corporations concerned about losing valuable information to a nuclear attack, it currently holds some of the most valuable and unique content in the world – items like Charles Dickens’ will and all of Universal Music Group’s original master recordings.  

More relevant to us, it is one of the world’s leaders in the data center business, and it currently operates over 1,400 storage locations across the world for analog and digital archives. With more than 225,000 customers across the world and a 98% customer retention rate, it is, simply put, one of the companies the world trusts most to hold on to and guard information.  

As the proliferation and adoption of AI create demand for greater storage and computing resources to power increasingly complex applications, Iron Mountain’s data center portfolio is very likely to see accelerated growth. Revenues grew 11% to $3.37 billion in 2023, blowing past the 8.2% year over year growth that was previously projected, and from there, the sky’s the limit.  

Still, the company seems to be reaching for it. In the first quarter of 2024, revenue topped $884.8, up 9.2% over Q1 2024.  

Even better, as of this writing, it’s offering a 1.65% dividend with room to grow, thanks to its 2014 conversion into a real estate investment trust (REIT), which requires it to distribute at least 90% of its taxable income to shareholders in the form of dividends.  

Action to Take: Buy Iron Mountain (NYSE: IRM) at market.

AI Income Stock #2: Crown Castle (CCI)

Crown Castle takes a different approach to the digital data market. It seeks to control the virtual highways of wireless infrastructure. Also a REIT, Crown Castle owns a vast network of cell towers, small cell nodes (think miniature cell towers hidden in things like streetlamps), and fiber lines that provide wireless and hardline connectivity across the United States.  

While the company has faced serious headwinds (mostly because of the Sprint and T-Mobile merger) that have beaten the stock up since the start of last year, every indication is that it’s on the path to turn things around. Sales growth has been steady as mobile infrastructure demand continues to grow, with the company’s revenue growing 3.9% to $6.53 billion by the end of 2023 and growing at a compound annual rate (CAGR) of 3% over the past three years.  

But it’s really the potential for AI connectivity demand that will drive the most growth. AI needs to crunch a lot more information than conventional networked devices, and it will need new protocols like the upcoming 6G, which Marcus Weldon of Nokia Bell Labs called a “sixth sense experience for humans and machines.”  

Crown Castle’s wide network of already existing wireless
infrastructure puts it in a prime position to be one of the leaders of the 6G rollout. And it opens the company up to a whole new market of customers looking to ensure wireless connectivity for AI devices.  

And here’s the best part: While you’re waiting for the stock to appreciate, you can enjoy a nice 5.93% dividend that the company is committed to growing, having done so for the past eight years.

Action to Take: Buy Crown Castle (NYSE: CCI) at market.

AI Income Stock #3: Digital Realty Trust (DLR)

Our third data center stock has been investing exclusively in carrier-neutral data centers since it started in 2004. Currently, it owns and operates over 300 data centers worldwide, with a total square footage above 34.5 million.  

Ironically enough, for a while, this company’s problem was that it couldn’t expand its holdings fast enough to meet demand and it was having a hard time accessing the necessary capital. But a capital recycling strategy, which involved selling off some assets and starting joint ventures with various asset management firms, seems to have given it the cash injection it needed to get back on track.  

The company will use that leverage to invest over $2 billion into developing additional data center properties so that it’s well prepared to provide the additional capacity needed for AI-related memory storage.  

That also means it’s taking on less debt, which preserves the 3.15% dividend that makes it so valuable to this stage of our investing plan.  

Action to Take: Buy Digital Realty Trust (NYSE: DLR) at market.