Communications Infrastructure institutional positioning Report Interpretation

Overview

This update combines 2Q26 13F positioning with Morgan Stanley's risk-reward frameworks for major North American communications-infrastructure REITs. The firm highlights broad institutional under-ownership, particularly in its Overweight-rated Equinix and American Tower, while maintaining a relative preference for data centers over towers.

Core views

Morgan Stanley aggregated available 13F filings for the quarter ended June 30, 2026, focusing on the top 100 actively managed institutional portfolios by assets under management. The analysis measures each stock's average portfolio weight against its S&P 500 weight. The firm cautions that filings reflect long-equity positions as of June 30, may have changed since reporting, and exclude derivatives and short exposure; hedge funds represent about 5% of assets in the sample. Institutional ownership of the communications-infrastructure coverage group remained 11 bps below its S&P 500 weight in 2Q26, unchanged from 1Q26. The group’s average portfolio weight fell 5 bps quarter on quarter to 0.36% from 0.41%, continuing a decline from a 0.92% peak in 1Q20. EQIX and AMT were each 4 bps underweight relative to the S&P 500, making them the most under-owned names in the coverage group; SBAC was in line with its index weight and DLR was 2 bps underweight. EQIX and DLR nevertheless represented the largest portfolio shares, at 0.13% and 0.08%, respectively, after each declined 1 bp in 2Q. AMT saw the largest quarterly reduction in portfolio weight, down 2 bps, while its active-share gap remained 4 bps below the S&P 500. The firm interprets the ownership pattern alongside a continued preference for data-center operators over towers. It argues that data centers benefit from favorable compute supply-demand dynamics, with demand for AI and non-AI workloads high while power supply remains constrained, supporting leasing prices and limiting overbuild risk. In contrast, towers lack near-term catalysts and face uncertainty around carrier investment and SpaceX, although their long-term contractual business models remain attractive. Equinix remains Morgan Stanley's Top Pick and Overweight-rated data-center name, with a $1,250 price target. The thesis rests on network effects in interconnection, rising cabinet power density, growth in interconnections per billable cabinet, and capital spending that the firm believes can capture retail-colocation demand. Morgan Stanley sees a path to roughly 13% revenue growth by 2029 and says AI inference demand is not fully reflected in expectations. Its FY26E base case assumes approximately 11.6% revenue growth, a 51% adjusted EBITDA margin, and approximately 12.6% AFFO per-share growth, valued at 26x forward adjusted EBITDA or 25x forward AFFO per share. The base-case scenario price is $1,250; the bull case is $1,500, assuming about 12% FY26E revenue growth, roughly 52% EBITDA margin, and 14.4% AFFO per-share growth; the bear case is $850, assuming weaker IT infrastructure investment and reduced returns on heavy capital spending. American Tower is Overweight-rated with a $220 target price. Morgan Stanley regards CoreSite, AMT's colocation data-center asset, as an underappreciated growth source and expects margin expansion to support mid-single-digit AFFO per-share growth. Its $220 target uses about 19x forward AFFO, below the sector's 10-year average of 22x. The firm cites data-center contribution, fading foreign-exchange headwinds, cost initiatives, and expected 2026 share repurchases as supports; the bull case is $255 at roughly 21x forward AFFO, while the bear case is $155 at roughly 14x. Countervailing risks include higher rates, slower carrier activity and capital expenditure, foreign-exchange and emerging-market exposure, carrier consolidation, and pressure on REIT multiples. Digital Realty is Equal-weight-rated with a $215 target. Its valuation assumes 22.5x forward adjusted EBITDA, or 26.2x forward AFFO per share, and FY26E assumptions of approximately 10.4% revenue growth, a 55.4% adjusted EBITDA margin, and about 7.7% AFFO-per-share growth. Morgan Stanley recognizes secular tailwinds from global data generation, hybrid cloud adoption, and enterprise digital transformation, as well as development capacity that provides visibility into power needs. However, it notes DLR's greater exposure to wholesale leasing, with longer leases, lower dollar-per-kW pricing, and more concentrated customers with greater bargaining power; it also believes the market is overly optimistic about near-term AI-fueled growth. SBA Communications is Equal-weight-rated. Morgan Stanley values it at 16.6x forward AFFO, below its 10-year average, reflecting confidence in the long-term tower model but near-term uncertainty around carrier network investment. The FY26E base case assumes negative 2.6% domestic organic growth and a 67.4% adjusted EBITDA margin. The firm highlights contractual revenues, operating leverage, rate escalators, low capital expenditure, high margins, creditworthy tenants, and high barriers to entry, but flags rates, leverage, carrier consolidation, foreign-market and FX exposure, and small-cell competition as risks.

Analysis framework

Morgan Stanley first compares top-100 active institutional portfolio weights with S&P 500 weights using 13F filings to assess positioning. It then applies company-level scenario analysis, operating forecasts, and valuation multiples—forward AFFO for tower REITs and forward adjusted EBITDA/AFFO for data-center REITs—to frame bull, base, and bear cases.

Methodology notes

• Quantitative, Factor, and Portfolio Theory

  13F active ownership-weighting analysis

  The report compares each company’s average weight in the top 100 active institutional portfolios with its S&P 500 weight to identify relative institutional under- or over-ownership.

• Valuation methodsEV/EBITDA valuation

  Forward adjusted EBITDA multiples

  Morgan Stanley values Digital Realty and Equinix using forward adjusted EBITDA multiples, linked to forecast growth and margin assumptions.

• Valuation methods

  Forward AFFO multiple valuation

  For tower REITs, the report uses price-to-forward-AFFO multiples and compares them with long-term sector averages to set scenario price targets.

• Industry AnalysisSupply-demand framework

  Data-center supply-demand analysis

  The report links high workload demand and constrained power supply to leasing prices, capacity absorption, and data-center growth prospects.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Equinix Inc. (EQIX.O)

  Overweight-rated Top Pick and the firm's preferred data-center exposure.

  Strengths

  Interconnection network effects, capacity expansion, rising cabinet density, and potential AI-inference upside.

  Weaknesses

  Heavy capital spending requires sufficient absorption and presales.

  Comparison

  Preferred over towers; its data-center dynamics are viewed more favorably than tower catalysts.

  Risks

  Macro-driven IT spending weakness, excess supply, obsolescence from higher power-density needs, and higher-for-longer rates.

• American Tower Corp. (AMT.N)

  Overweight-rated tower operator viewed as an attractive entry point.

  Strengths

  CoreSite growth opportunity, cost initiatives, fading FX headwinds, and potential buybacks.

  Weaknesses

  Limited near-term tower catalysts and uncertainty around carrier activity.

  Comparison

  More under-owned than peers versus the S&P 500, but Morgan Stanley still prefers data centers over towers overall.

  Risks

  Rising rates, FX and emerging-market exposure, weaker carrier capex, and carrier consolidation.

• Digital Realty Trust Inc. (DLR.N)

  Equal-weight-rated data-center operator.

  Strengths

  Secular demand from data generation, hybrid cloud, and digital transformation; development capacity supports future power needs.

  Weaknesses

  Wholesale-leasing exposure entails lower pricing per kW and more concentrated customers.

  Comparison

  Morgan Stanley believes the market is more optimistic about near-term AI-fueled growth than warranted.

  Risks

  Soft IT spending, excess supply, higher power-density requirements, and elevated interest rates.

• SBA Communications (SBAC.O)

  Equal-weight-rated tower operator.

  Strengths

  Long-term contracts, operating leverage, escalators, low capex, high margins, and high barriers to entry.

  Weaknesses

  Near-term uncertainty around carrier network investment.

  Comparison

  Institutional ownership was in line with its S&P 500 weight, unlike the under-owned EQIX and AMT.

  Risks

  Rising rates and leverage, carrier consolidation, Brazil/FX exposure, and small-cell competition.

Key data

• Coverage-group active share versus S&P 500(0.11%) in 2Q26Unchanged from 1Q26; the group was 11 bps underweight.
• Coverage-group institutional portfolio weight0.36% in 2Q26Down 5 bps quarter on quarter from 0.41%; compared with a 0.92% peak in 1Q20.
• EQIX and AMT active share(0.04%) eachEach was 4 bps underweight relative to the S&P 500.
• EQIX FY26E base case~11.6% revenue growth; 51% adjusted EBITDA margin; ~12.6% AFFO/share growthSupports the $1,250 base-case price target.
• DLR FY26E base case~10.4% revenue growth; 55.4% adjusted EBITDA margin; ~7.7% AFFO/share growthUnderlying the $215 target valuation.
• AMT price-target valuation~19x forward AFFOBelow the 10-year sector average of 22x.
• SBAC FY26E base case-2.6% domestic organic growth; 67.4% adjusted EBITDA marginReflects near-term carrier-investment uncertainty.

Impact & implications

Morgan Stanley sees the under-ownership of EQIX and AMT as notable alongside its Overweight views. Its preferred exposure remains data centers, where constrained power supply and compute demand support pricing and growth, while tower valuations may be attractive but lack comparable near-term catalysts.

Risks

• 13F data are backward-looking, limited to long equity, exclude derivatives and short exposure, and may not represent broader market positioning.
• Macro softness could reduce IT data-center spending and demand.
• Excess data-center supply could pressure leasing pricing.
• Higher power-density requirements could increase data-center obsolescence risk.
• Higher-for-longer interest rates could weigh on REIT valuation multiples.
• Tower operators face slower carrier activity, carrier consolidation, FX and emerging-market risks.

What to watch

• Changes in institutional ownership weights relative to S&P 500 weights.
• Data-center leasing prices, power availability, and the pace of AI inference demand.
• Equinix interconnections per billable cabinet, capital-spending returns, and absorption levels.
• American Tower's CoreSite growth, cost initiatives, FX headwinds, leasing growth, and share-repurchase activity.
• Carrier network investment, consolidation, and interest-rate trends affecting tower REITs.