Equinix inks Nvidia partnership to offer flexible AI model deployment, but valuation remains stretched amid high capex

What happened

Equinix announced a partnership with Nvidia and open-source platform Together AI, allowing customers to run AI models flexibly within its data centers. The deal positions Equinix to capture enterprise AI demand without directly competing with hyperscalers or neoclouds. However, the company's latest filings show aggressive capital spending, with capex rising to $2.834 billion in the first half of 2026 versus $1.739 billion a year earlier, driving free cash flow negative. Management raised 2026 guidance but also increased long-term capex outlook, reflecting the need to secure power and expand capacity. While the Nvidia partnership is strategically sensible, it does not address the core concern that the stock trades at 69.6x P/E and 31.8x EV/EBITDA with no margin of safety.

Implication

The Nvidia deal reinforces Equinix's role in the AI ecosystem by leveraging its vendor-neutral interconnection platform to host AI workloads. However, the underlying business remains capital-intensive, and the market already prices in strong AI-driven demand. Investors should monitor whether the partnership converts into meaningful bookings and whether the elevated capex ultimately supports AFFO per share growth without further dilution or deleveraging pressure. Until there is clarity on power constraints and project returns, the risk/reward remains unattractive for new positions.

Thesis delta

The investment thesis remains WAIT. The Nvidia partnership adds a tactical option for AI deployments but does not change the fundamental equation of high valuation and rising capital intensity. The core watchpoints remain the same: whether bookings translate into timely revenue and whether capex growth outpaces cash flow generation.