The grid is breaking.
Wall Street is currently obsessed with the hypothetical billions flowing into OpenAI. Jim Cramer and the retail crowd see a gold rush for data center REITs. They are missing the physical reality of 2025. The bottleneck is no longer the silicon; it is the copper. While companies like Digital Realty (DLR) and Equinix (EQIX) post record backlogs, the actual delivery of these megawatts is stalling. We are witnessing a divergence between ‘signed leases’ and ‘energized capacity’ that most analysts are choosing to ignore.
On December 17, 2025, reports surfaced that the PJM Interconnection, which services the critical Northern Virginia data center hub, saw a 14 percent spike in peak load forecasts. This is not just a number on a spreadsheet. It is a physical wall. The current narrative suggests that OpenAI’s next funding round, rumored to be at a valuation exceeding $150 billion per Bloomberg reporting, will act as a rising tide for all boats. In reality, that capital is chasing a finite supply of power that the aging US utility grid cannot provide in the timeframe investors expect.
The Myth of Infinite Scalability
The math is brutal. A standard rack in 2023 consumed 10 to 15 kilowatts. Today, as we approach the end of 2025, high-density AI clusters utilizing liquid-cooled Blackwell and early-production Rubin chips are demanding 100 to 120 kilowatts per rack. This 10x increase in power density has rendered older data center designs obsolete. Retail investors buying the ‘AI infrastructure’ dip are often unknowingly purchasing legacy real estate that lacks the floor loading and cooling infrastructure to support the very AI workloads they are betting on.
Look at the Price to Funds From Operations (P/FFO) multiples. Digital Realty is currently trading at nearly 24 times 2025 FFO. This is a premium usually reserved for high-growth software companies, not capital-intensive real estate. The ‘catch’ is the CapEx. To stay relevant, these REITs are being forced to retroactively install liquid cooling loops, a process that is both expensive and disruptive. Per recent Reuters analysis of utility constraints, the lead time for high-voltage transformers has stretched to 140 weeks. If a data center is not already powered today, it will not be powered until late 2027.
Energy Gap: Demand vs. Grid Capacity (Dec 2025)
The OpenAI Funding Distortion
OpenAI’s burn rate is the elephant in the room. As they seek fresh capital, the markets are pricing in a ‘compute-at-any-cost’ mentality. This creates a dangerous feedback loop. OpenAI raises billions, they commit that capital to Microsoft or Oracle, who then lean on Equinix or Digital Realty. However, the SEC filings for these infrastructure providers show a staggering increase in debt-to-equity ratios. They are borrowing at 2025 rates to build facilities that may not see full occupancy if the AI ‘inference’ market doesn’t monetize as quickly as the ‘training’ market has.
There is a specific risk in the ‘Hyperscale’ concentration. Currently, over 60 percent of the new leasing activity in the Northern Virginia and Hillsboro markets is tied to just four tenants. If OpenAI or its primary backers pivot their strategy or face a regulatory slowdown, the ‘moat’ around these data center stocks will look more like a puddle. The risk isn’t just a lack of demand; it is the concentration of counterparty risk in an environment where interest rates remain stubbornly high to combat persistent service-sector inflation.
Current Valuation Metrics (December 19, 2025)
| Ticker | Price/FFO | Dividend Yield | Power Backlog (MW) |
|---|---|---|---|
| DLR | 23.8x | 2.8% | 2,400 |
| EQIX | 27.1x | 1.9% | 1,150 |
| VRT | 41.5x (P/E) | 0.1% | N/A (Supply Chain) |
The Efficiency Paradox
As hardware becomes more efficient, the total power draw should theoretically drop. Instead, we are seeing Jevons Paradox in real-time. Every gain in H200 or Blackwell efficiency is immediately consumed by larger model parameters. This has forced data center operators into a desperate scramble for ‘behind-the-meter’ power solutions. We are seeing companies like Microsoft and Amazon attempt to buy nuclear capacity directly from Constellation Energy. This is a move of desperation, not choice. They are bypassing the public grid because the public grid is full.
For the individual investor, the ‘catch’ is the timeline. The stock price of a data center REIT reflects the promise of the 2026 and 2027 pipeline. But if the PJM or ERCOT grids cannot support the interconnections, those projected earnings will face massive impairments. We are already seeing ‘curtailment’ risks where data centers are asked to power down during peak summer and winter events. This is the first time in the history of the cloud that ‘uptime’ is being threatened by external grid stability rather than internal hardware failure.
The next data point that will make or break this sector arrives in early February 2026. Keep a close eye on the PJM Base Residual Auction results. If the clearing prices for capacity continue to skyrocket, it will signal that the cost of power is about to eat the margins of every major data center operator in the United States. The OpenAI funding news is a shiny object; the transformer lead times and grid clearing prices are the reality.
