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

On Wednesday, Hindenburg Research accused Equinix, a $80 billion data center provider, of selling shareholders a “AI pipe dream” and distorting key indicators to appear profitable.

Hindenburg stated that it had taken a short position against Equinix, implying that it expected shares of the real estate investment trust, or REIT, to fall.

Equinix shares fell as much as 7% in premarket trade before recovering about 3% at Wednesday’s beginning.

Equinix’s customers include Amazon, Google, and Microsoft’s cloud divisions, according to its website.

“We are investigating the claims and will respond in due course,” a spokeswoman for Equinix told CNBC.

According to the short seller, Equinix classified maintenance expenses — a major cost center for REITs — as spending on expansion, giving the impression “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 drive to misclassify capex as expansion rather than maintenance originated “from top management.”

Hindenburg claimed that the “questionable” accounting allowed Equinix to increase its adjusted funds from operations, a criteria used to decide executive stock rewards.

Equinix was created in 1998 and converted to a REIT in 2015. A regulatory filing shows that it had over 13,000 workers as of December 2023.

In its most recent earnings reports, the business emphasized its “crucial” role “in an AI-driven world.”

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