DLR Plummets 2.5% Amid Short-Squeeze Fears and AI Infrastructure Optimism – What’s Next?

Summary
• DLR trades at $154.78, down 2.54% intraday, with a 52-week range of $129.95–$198.00
• Short interest hits 2.89% of float, with a 5.91-day cover ratio, signaling potential short squeeze
• Q3 2025 revenue hits $1.6B, driven by 50%+ AI workload bookings
• Analysts project 2025 Core FFO per share to $7.32–$7.38, with a $199.48 mean price target

Digital Realty Trust (DLR) is in the spotlight as a sharp intraday decline of 2.54% raises questions about short-term technical pressures and long-term AI infrastructure growth. With short interest at 2.89% of the float and a 5.91-day cover ratio, the stock faces immediate volatility risks. Meanwhile, Q3 2025 revenue of $1.6B and strategic AI partnerships—such as a $11B India joint venture—underscore its role in the $934B 2030 AI infrastructure boom. This duality of short-term technical dynamics and long-term fundamentals creates a compelling case study for investors.

Short-Squeeze Dynamics and AI Growth Fuel Volatility
DLR’s 2.54% intraday drop follows a surge in short interest to 2.89% of the public float, with a 5.91-day cover ratio. This metric suggests that a sharp upward move could trigger a self-reinforcing short squeeze as sellers scramble to cover positions. However, the stock’s recent volatility—swinging between $149.26 and $159.58—reflects broader market uncertainty. Meanwhile, DLR’s Q3 2025 revenue of $1.6B, driven by 50%+ AI workload bookings, and strategic partnerships like the $11B India joint venture with Reliance and Brookfield, position it as a key player in the AI infrastructure boom. These fundamentals create a tug-of-war between short-term technical pressures and long-term growth narratives.

Diversified REITs Sector Mixed as EQIX Trails DLR’s Volatility
The Diversified REITs sector, led by Equinix (EQIX), shows mixed performance. EQIX, a sector leader, is down 0.47% intraday, reflecting broader REIT sector caution amid rising interest rates. While DLR’s short-term volatility is amplified by its short-interest profile, the sector’s focus on data centers and AI infrastructure remains intact. DLR’s strategic AI partnerships and retrofitting of facilities for AI workloads differentiate it from peers, but its short-term technical risks—such as the 5.91-day cover ratio—add a layer of complexity not seen in more stable REITs like EQIX.

Options Playbook: Leveraging Volatility with DLR20251219P150 and DLR20251219P152.5
• MACD: -1.54 (Signal Line: -2.15, Histogram: +0.61) – Indicates bearish momentum
• RSI: 52.5 – Neutral, but trending lower
• Bollinger Bands: Upper $163.87, Middle $159.31, Lower $154.76 – Price near lower band
• 200D MA: $165.31 (Price: $154.78) – Strong bearish divergence
• Key Levels: Support at $154.76 (lower Bollinger), resistance at $159.50 (30D support)

DLR’s technicals suggest a short-term bearish bias, with price near the lower Bollinger Band and a 200D MA gap of $10.53. The 52.5 RSI and negative MACD histogram hint at continued downward pressure. For options traders, the DLR20251219P150 and DLR20251219P152.5 contracts stand out due to their high leverage, liquidity, and favorable Greeks:

• DLR20251219P150
- Code: DLR20251219P150
- Type: Put
- Strike: $150
- Expiry: 2025-12-19
- IV: 47.52% (moderate)
- LVR: 59.89% (high)
- Delta: -0.342 (moderate sensitivity)
- Theta: -0.158 (moderate time decay)
- Gamma: 0.0339 (moderate price sensitivity)
- Turnover: $107,490 (high liquidity)
- Payoff (5% downside): $4.78 per contract (max gain if DLR drops to $147)
- Why it stands out: High leverage and liquidity make it ideal for capitalizing on a potential short squeeze or continued bearish move.

• DLR20251219P152.5
- Code: DLR20251219P152.5
- Type: Put
- Strike: $152.5
- Expiry: 2025-12-19
- IV: 34.03% (moderate)
- LVR: 64.14% (high)
- Delta: -0.415 (strong sensitivity)
- Theta: -0.083 (low time decay)
- Gamma: 0.0502 (high price sensitivity)
- Turnover: $121,026 (high liquidity)
- Payoff (5% downside): $7.28 per contract (max gain if DLR drops to $147)
- Why it stands out: Strong delta and gamma make it responsive to price swings, while high leverage amplifies returns in a bearish scenario.

Hook: Aggressive bears should target DLR20251219P150 into a breakdown below $154.76, while DLR20251219P152.5 offers a safer entry if the stock consolidates near $152.5.

Backtest Digital Realty Trust Stock Performance
The backtest of Digital Realty Corporation (DLR) after an intraday plunge of -3% from 2022 to the present shows favorable performance metrics. The 3-Day win rate is 50%, the 10-Day win rate is 53.97%, and the 30-Day win rate is 56.07%, indicating that the stock tends to recover positively in the short term following a significant drop. The maximum return during the backtest period was 1.69%, which occurred on day 59, suggesting that while the stock may experience some volatility, it has the potential to bounce back with modest gains.

DLR at Inflection Point: Short-Squeeze or AI-Driven Recovery?
DLR’s 2.54% intraday drop highlights a critical juncture where short-term technical pressures clash with long-term AI infrastructure growth. The 5.91-day cover ratio and $1.6B Q3 revenue underscore its dual narrative: a short-squeeze candidate and a key player in the $934B 2030 AI infrastructure market. While the 200D MA gap and bearish MACD suggest near-term weakness, the stock’s strategic AI partnerships and retrofitting efforts provide a floor. Investors should watch for a rebound above $159.50 (30D support) or a breakdown below $154.76 (lower Bollinger Band). Meanwhile, sector leader Equinix (EQIX) is down 0.47%, signaling broader REIT caution. Action: Position for a short squeeze with DLR20251219P150 or DLR20251219P152.5 if DLR tests $147, but monitor AI infrastructure demand for a potential reversal.