🏢The Digital Gold Rush: Why SRVR Might Be Your Gateway to the AI Infrastructure Boom

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Suppose you've been keeping up with the AI revolution transforming various markets. In that case, you've probably heard a lot about chip makers like NVIDIA and software companies capitalizing on the artificial intelligence trend. However, there's another critical aspect that has been quietly supporting this entire boom from behind the scenes: data centres. Today, we will explore the Pacer Data & Infrastructure Real Estate ETF $SRVR ( ▲ 0.16% ) , which focuses on investing in the digital infrastructure that powers our AI-driven world.

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What is SRVR?

Real Estate Investment Trusts (REITs) are a popular choice for investors seeking capital appreciation and consistent dividend income. Unlike traditional growth stocks, which reinvest profits, REITs must distribute at least 90% of their taxable income to shareholders as dividends. This setup allows investors to benefit from valuable real estate assets while receiving steady income.

However, not all REITs are the same, making SRVR's focus on data and infrastructure particularly interesting.

Data centres are the unsung heroes of the digital age, housing the servers and equipment that support everything from Netflix to ChatGPT. As AI applications grow in popularity and complexity, the demand for essential facilities like ChatGPT has skyrocketed.

• 🏗️ Recession-Resistant Demand: Unlike retail spaces that can empty during economic downturns or office buildings that face challenges from remote work trends, data centres house mission-critical infrastructure. Companies can't simply "turn off" their data processing needs when times get tough.

• 📄Long-Term Contracts: Data centre tenants typically sign multi-year leases, often spanning 5-15 years. This provides predictable cash flows that REIT investors love.

• 💽High Barriers to Entry: Building a modern data centre isn't like constructing a strip mall. These facilities require specialised electrical infrastructure, cooling systems, and security measures and often take years to develop—creating a natural moat around existing properties.

McKinsey analysis indicates that global demand for data centre capacity could grow by 19% to 22% annually from 2023 to 2030. This growth would require constructing twice the data centre capacity built since 2000 in less than a quarter of the time.

Modern AI models require substantial computational power, which NVIDIA's Blackwell GPU architecture provides for trillions of parameters. However, these GPUs require sophisticated cooling and housing. As AI applications become increasingly real-time focused, demand for data centres close to end-users is increasing, impacting both traditional tech hubs and suburban markets. By 2027, an estimated $8.75 trillion of the global economy is expected to rely on data centres as businesses integrate AI, driving increased infrastructure needs.

Investment Strategy📊

🛰️Core-Satellite Approach: SRVR works best as a satellite holding rather than a core position. Here's how to think about sizing:

• 🛡️Conservative Allocation (3-5% of portfolio): If you're building a diversified ETF portfolio, consider SRVR as a specialized real estate play that complements broader REIT exposure through funds like VNQ.

• 📈Thematic Growth Allocation (5-8% of portfolio): For investors specifically targeting AI and digital infrastructure themes, SRVR can play a larger role alongside technology ETFs, potentially paired with funds like ROBO.

• 🚀Aggressive Growth Strategy (8-12% of portfolio): Bold investors are convinced that the data centre super-cycle might allocate more significantly, but remember that concentration brings both opportunity and risk.

SRVR pairs well with:

• Broad market ETFs (VTI, VOO) for stability

• Technology sector funds (XLK, VGT) for AI chip exposure

• Infrastructure ETFs (PAVE, IFRA) for broader infrastructure play

• International REITs (VNQI) for geographic diversification

SRVR at a glance

ETF Issuer: Pacer ETFs

Inception: 2018-05-15

Asset Class: Equity (REITs)

Underlying Index: Solactive GPR Data & Infrastructure Real Estate Index

Geographical Focus: Global

Expense Ratio: 0.60% (as of last data point)

Dividend Yield: 1.16% (as of last data point)

Distribution Frequency: Quarterly

Historical Performance

SRVR has experienced significant fund flows over its history, indicating investor interest in the data centre theme.

SRVR's largest holdings include American Tower Corporation, Equinix Inc., and Digital Realty Trust Inc. —all leaders in their respective data infrastructure niches. These companies have demonstrated resilient business models through various market cycles.

• American Tower (AMT): The world's largest cell tower operator benefits from the 5G rollout and edge computing trends.

• Equinix (EQIX): Equinix has increased its quarterly revenue for more than 22 straight years, claiming the longest track record of any company in the S&P 500.

• Digital Realty Trust (DLR): The company anticipates 5.8% core funds from operations (FFO) growth for 2025.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Structural Demand Tsunami: The AI boom isn't a fad—it's a fundamental shift in how businesses operate. Major tech companies, including Microsoft, Google, Meta, and Amazon, plan to spend over $300 billion in capital expenditures this year, primarily on AI infrastructure. This massive investment cycle is just beginning, providing multi-year tailwinds for data centre demand.

2. Supply-Demand Imbalance: A tight supply is already apparent in the market, with prices charged by colocation providers rising by an average of 35% between 2020 and 2023. In Northern Virginia, considered the data capital of the world, vacancy rates were less than 1% in 2024. This scarcity gives existing data centre owners significant pricing power.

3. Dividend Income Plus Appreciation: SRVR maintains a cost advantage over competitors, priced within the lowest fee quintile among peers while providing exposure to REITs that typically offer attractive dividend yields. This advantage creates the potential for both current income and long-term capital appreciation.

Top 3 Reasons Not to Invest

1. Interest Rate Sensitivity: REITs typically underperform when interest rates rise rapidly. Higher rates increase borrowing costs for property development and make dividend yields less attractive compared to risk-free bonds. If the Federal Reserve reverses course on monetary policy, SRVR could face headwinds.

2. Technology Disruption Risk: The same AI revolution driving demand could eventually make data centres more efficient, reducing space requirements per unit of computing power. Edge computing and quantum computing developments also change infrastructure needs in unpredictable ways.

3. Concentration Risk and Valuation Concerns: SRVR's top 10 holdings account for a significant portion of the fund, thereby creating concentration risk. Additionally, some data centre REITs trade at premium valuations reflecting high growth expectations—setting up a potential disappointment if growth doesn't materialize as expected.

🚀SRVR: The Rocket Fuel Behind AI Success Stories

SRVR offers investors a chance to engage in a significant structural trend by focusing on specialised real estate investment trusts (REITs) that benefit from AI-driven demand and low vacancy rates. With an emphasis on data and infrastructure REITs, the fund is well-positioned for long-term growth driven by major technology companies.

For ETF UNO readers building diversified portfolios, SRVR could serve as an appealing satellite holding that provides both income and growth exposure to the AI infrastructure boom. Remember to size your position appropriately within your overall investment strategy.

Are you ready to discover innovative ETF opportunities? Join the ETF UNO community for exclusive analysis and insights on the trends shaping tomorrow’s markets. In the fast-paced world of ETF investing, staying ahead is essential. Visit ETF UNO and redefine your investing journey, one ETF at a time.

DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.