Is Digital Realty Trust (DLR) Becoming a Short-Squeeze Catalyst Amid Rising AI Demand and Strong Fundamentals?

The intersection of short-term technical dynamics and long-term growth narratives has rarely been as compelling as it is for Digital Realty Trust (DLR). With short interest climbing to 2.89% of the public float as of November 26, 2025, and a short interest ratio of 5.91 days to cover, the stock is primed for a potential short squeeze. Simultaneously, DLR's strategic alignment with the AI infrastructure boom-bolstered by $1.6 billion in Q3 2025 revenue and a 10% year-over-year increase-positions it as a dual-force investment opportunity. This analysis explores how contrarian short-term positioning and long-term fundamentals converge to create a unique catalyst for DLR.

Short-Term Dynamics: Rising Short Interest and Price Momentum

DLR's short interest has surged by 3.21% since the prior reporting period, reflecting growing bearish sentiment. However, the stock's recent price action tells a different story. From November 21 to November 26, DLR fluctuated between $157.32 and $160.05, closing at $157.32 on November 26 after a peak of $160.05. This volatility, combined with a short interest ratio of nearly 6 days to cover, suggests that a sharp upward move could force short sellers to scramble for cover.

Historically, stocks with high short interest ratios and strong price momentum often experience self-reinforcing rallies as short-covering amplifies buying pressure.

The risk-reward asymmetry here is notable. If DLR's share price continues to trend higher-driven by AI demand or broader market optimism-short sellers may face margin calls, accelerating the squeeze. This dynamic is particularly potent in a market environment where AI-driven equities are attracting institutional and retail capital alike.

Long-Term Fundamentals: AI Infrastructure as a Growth Engine

While short-term traders focus on technicals, DLR's long-term value proposition is anchored in its aggressive pivot toward AI infrastructure. According to Q3 2025 results, over 50% of the company's quarterly bookings are now tied to AI workloads. This aligns with a broader industry trend: AI-specific data center investments are projected to balloon from $236 billion in 2025 to $934 billion by 2030. DLR is not merely a passive beneficiary; it is actively retrofitting existing facilities and constructing new AI-optimized data centers, a process that takes up to 18 months.

Strategic partnerships further solidify this trajectory. A $11 billion joint venture in India with Reliance Industries and Brookfield Corporation, coupled with a $373 million power equipment agreement with Schneider Electric, underscores DLR's commitment to scaling AI infrastructure. These moves are already translating into financial performance: DLR raised its 2025 Core FFO per share outlook to $7.32–$7.38, reflecting confidence in its ability to monetize AI-driven demand.

Contrarian Positioning: Bridging the Short and Long Term

The key to DLR's current appeal lies in the convergence of short-term technicals and long-term fundamentals. For contrarians, the rising short interest and days-to-cover ratio present a tactical opportunity to capitalize on a potential squeeze. However, the broader narrative of AI infrastructure growth ensures that even if the short squeeze fizzles, DLR's fundamentals remain robust.

This dual alignment is rare. Most short-squeeze candidates lack the underlying business momentum to sustain gains beyond the immediate technical rebound. DLR, however, is different. Its AI-focused investments are not speculative but operational, with $1.6 billion in Q3 revenue and a $6.025–$6.075 billion full-year 2025 revenue projection. Analysts project earnings to reach $1.0 billion by August 2028, suggesting that the long-term growth story is already in motion.

Conclusion: A Catalyst for Both Sides of the Market

DLR's current positioning as a short-squeeze candidate is not a standalone event but a symptom of deeper structural shifts. The company's short interest metrics create immediate volatility risk, while its AI infrastructure bets ensure that the long-term trajectory is upward. For investors, this duality offers a rare chance to profit from both technical and fundamental drivers.

As the AI infrastructure boom accelerates, DLR's ability to monetize this trend-combined with the looming threat of a short squeeze-makes it a compelling case study in market dynamics. Whether through contrarian short-term positioning or long-term growth alignment, the stock exemplifies how macroeconomic forces and investor sentiment can coalesce into a powerful catalyst.