Editor's note: Great businesses adapt to changing market environments... And the companies that adapt before a new trend takes root can reap huge rewards. As John Evelius from our corporate affiliate Chaikin Analytics explains, that's how a surprising, old-school firm positioned itself for the AI boom – long before most investors even knew what a data center was.
In the late 1930s, a farmer needed a large, cool, dark place to grow mushrooms...
So he bought an abandoned iron-ore mine in Livingston, New York.
Things went well for years. But by the early 1950s, the mushroom business had gone soft. Other growers had caught up. The farmer needed a new use for his empty caverns.
The Cold War – and the doomsday fears that came with it – gave him one.
Businesses were nervous about losing their records in a Soviet attack. A mine sitting deep underground, shielded by rock, seemed like the perfect place to store them.
So the farmer made a deal. He bought a 28-ton vault door from a bankrupt Ohio bank for one dollar. He then paid $20,000 to ship it to New York.
Just like that, he'd turned his old mushroom farm into a bomb-resistant safe for corporate paperwork.
His first customer was a savings bank. It sent over microfilm records by armored car.
A decade later, the vault held something different: a Claude Monet painting. It sat safely next to old ledgers and contracts. Law firms sent over case files... Insurance companies sent over policies... And Hollywood studios started shipping the company master film reels.
By the 1990s, the company had become corporate America's go-to solution for storing anything too precious to lose.
In 2002, Bill Gates entrusted the company with his Corbis photo collection... which included original snapshots of the Beatles and Franklin Roosevelt.
In 2011, the company helped the John F. Kennedy Presidential Library digitally archive more than 200,000 documents, 1,500 photos, and hundreds of audio recordings.
But in 2013, the company once again made a big bet on something completely different...
It launched a data-center division – nearly a decade before OpenAI's ChatGPT kicked off the AI boom.
And as I'll explain today, that early move is paying off in a way nobody could have guessed...
AI Data Centers Drive Growth
The records-storage business that former farmer Herman Knaust built out of an old mine is still around. And it has changed less than you'd think.
Iron Mountain (IRM) still stores the physical objects that people and businesses can't afford to lose, like important documents, pieces of art, film reels, and vintage photographs...
What has changed is that the company continues to build around that original business. Time and again, we have seen Iron Mountain adapt to new technology. And right now, business is booming.
We can see this in Iron Mountain's second-quarter earnings. It reported revenue of roughly $2 billion, up 19% year over year. Operating cash flow topped $888 million year to date, up $315 million year over year.
And Iron Mountain's data-center business is thriving. This segment saw revenue jump 39% year over year to $263 million.
But a newer segment called asset-lifecycle management ("ALM") is what really caught my attention...
You see, this business decommissions old data-center equipment, wipes it clean, and then resells and recycles what's left.
This isn't glamorous work. But suddenly, it's in high demand.
ALM revenue nearly doubled in the second quarter, jumping 88% year over year to $288 million. Data-center decommissioning drove much of that surge, more than doubling year over year.
And this is only the tip of the iceberg. Iron Mountain expects ALM revenue to continue to grow as this market expands.
Altogether, the digital, data-center, and ALM segments grew more than 50% in the second quarter. And investors have noticed...
Iron Mountain's shares have soared 56% so far this year. Management has responded by raising full-year guidance – projecting another year of double-digit growth.
The company was built to protect documents from Cold War bombs that never dropped. Now, it has become part of the AI boom.
And right now, the Power Gauge – a system we use at Chaikin Analytics to analyze the markets – rates Iron Mountain as "very bullish." In fact, the stock has a nearly perfect score, with a "bullish" or better rating in all four categories – Earnings, Financials, Technicals, and Experts.
As you can see in the chart below, Iron Mountain shares trade above their long-term trend line (the blue line in the chart). Take a look...
The Chaikin Money Flow – the indicator we use to track institutional activity on Wall Street – recently dipped into negative territory. So there is reason for caution.
But Iron Mountain just posted a record quarter, raised full-year guidance, and grew its highest-margin businesses sharply. If its Money Flow turns positive again, that could signal more growth ahead.
So keep an eye on this AI-infrastructure play hiding in plain sight.
Good investing,
John Evelius
Editor's note: The Chaikin Analytics team can use a special feature in the Power Gauge that measures how reliable a company's earnings really are...
Not only that, but they've used this filter to expose an upcoming "disconnect" in the market... And it could create the biggest AI moneymaking opportunity of the next 12 months. Make sure you get the details before August 26.
Further Reading
As Iron Mountain shows, the AI boom is pulling in companies from all corners. And that's true not just in terms of sector but also geography. A memory-chip shortage looked like a major obstacle... until one unexpected country stepped in to fill the gap.
The emergence of AI isn't new. At Stansberry Research, we've been writing about "artificial brains" since 2016. The technology has come a long way in that time. But this trend still has plenty of runway left.