Data center provider Equinix ‘selling an AI pipe dream,’ Hindenburg Research says in short report

Hindenburg Research on Wednesday took aim at Equinix, the $80 billion data center provider, and accused the company’s management of selling shareholders an “AI pipe dream” while manipulating key metrics to boost the appearance of profitability.

Hindenburg said it had taken a short position against Equinix, meaning it was betting that shares of the real estate investment trust, or REIT, would fall.

Equinix shares plunged as much as 7% in pre-market trading before paring back losses at Wednesday’s open to around 3%.

The company’s customers include the cloud divisions of Amazon, Google and Microsoft, according to Equinix’s website.

“We are investigating the claims and we will respond in due course,” an Equinix spokesperson told CNBC.

The short seller said that Equinix reported maintenance expenses — a major cost center for REITs — as spending on growth, making it appear that “that the company’s cost to maintain its revenue base is lower than it actually is.”

Former Equinix employees and executives allegedly told Hindenburg that the pressure to misclassify capex as growth rather than maintenance came “from top management.”

Hindenburg said that the “questionable” accounting allowed Equinix to boost its adjusted funds from operations, a metric the company also used to determine executive stock grants.

Equinix was founded in 1998 and became a REIT in 2015. It had more than 13,000 employees as of December 2023, according to a regulatory filing.

In its more recent earnings reports, the company has touted its “crucial” role “in an AI-driven world.”

Hindenburg has taken short positions against other big names, including Nikola, Icahn Enterprises and Gautam Adani’s conglomerate.