The rapid expansion of digital technologies and data-intensive applications, including artificial intelligence (AI), cloud computing, and enterprise digital transformation, is driving an unprecedented surge in demand for data centers and related services. In recent years, hyperscalers—large-scale cloud service providers (CSPs)—have been the primary force behind the growing need for AI-ready data centers due to the immense capacity required to support large foundational models.
A report published by McKinsey & Company in October 2024 projected that global data center capacity demand could increase annually by 19% to 22% between 2023 and 2030, reaching 171 to 219 gigawatts (GW). This represents a massive leap from the current demand of 60 GW. According to McKinsey, the industry would need to construct at least twice the total data center capacity built since 2000 in less than a quarter of the time to prevent a potential shortfall.
However, such tremendous growth won’t come without its own set of challenges. Power supply constraints are becoming a pressing concern. Stephen Byrd, Global Head of Sustainability Research at Morgan Stanley, discussed this issue in a CNBC interview, estimating that the U.S. could face a power deficit of 36 GW by 2028. To mitigate this, he highlighted the need for “de-bottlenecking solutions,” such as leveraging nuclear energy, converting cryptocurrency mining facilities, and deploying fuel cells to meet the soaring energy demands of data centers.
That said, there will be a shift in the power usage pattern as well. A January 2025 report from Boston Consulting Group (BCG) forecasts that hyperscalers will account for nearly 60% of the data center industry’s growth from 2023 to 2028, increasing their share of global power consumption from 35% to 45%. Meanwhile, enterprises that maintain their own on-premises data centers are expected to see their share decline from 10% to 5%, as companies continue migrating workloads to cloud and colocation providers. Colocation providers, which lease infrastructure and offer specialized cloud solutions, will account for the remaining 50% of power demand as hyperscalers increasingly rely on their services to scale operations efficiently.
Overall, the data center industry is undergoing a period of rapid expansion, with substantial investments and growth projected for years to come. While concerns over power consumption will remain a key focus, data centers have become essential to the digital economy, ensuring continued growth both domestically and in international markets.
With this in mind, let’s take a closer look at the 10 best-performing data center stocks in 2025.
An executive overviewing a data center full of servers and systems managing their technology solutions.
Our Methodology
To determine the 10 best-performing data center stocks in 2025, we conducted in-depth research to compile a list of U.S.-listed data center companies. Our process involved analyzing relevant exchange-traded funds (ETFs), research reports, and proprietary databases to identify key industry players. We then calculated the year-to-date (YTD) returns for all the identified companies and shortlisted the top 10 based on their performance. These companies were subsequently ranked in ascending order, with those generating the highest YTD returns placed at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: all pricing data is as of market close on February 21.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Performing Data Center Stocks So Far in 2025
10. Nutanix Inc. (NASDAQ:NTNX)
YTD Returns: 14.0%
Number of Hedge Fund Holders: 51
Nutanix Inc. (NASDAQ:NTNX) offers software-defined hyperconverged infrastructure (HCI) platforms, integrating computing, storage, networking, and virtualization into one comprehensive solution. This platform eases cloud complexities, enabling businesses to effortlessly manage applications and data across public and private clouds, data centers, on-premises, and edge environments.
Driven by secular growth trends in hybrid multicloud adoption, data center infrastructure modernization, and generative AI, Nutanix Inc. (NASDAQ:NTNX) benefits from its robust market position in the HCI sector. The company envisions a substantial and expanding market, with the total addressable market (TAM) projected at $76 billion by FY 2027. Approximately 50% of this TAM consists of the on-premise hyperconverged infrastructure market, with the next significant opportunity in database automation and database-as-a-service.
The stock has surged 14% in 2025 and outperformed the benchmark Philadelphia Semiconductor Index (SOX Index) by 11%. The stocks had shown a solid 28% increase in 2024. Despite this growth, consensus potential upside remains around 19%. On February 20, a Wells Fargo analyst reiterated a Hold rating on Nutanix Inc. (NASDAQ:NTNX) with a price target of $75. Previously, a Raymond James analyst reaffirmed a Buy rating on the shares, setting a price target of $76 in their report published on January 17.
9. Western Digital Corp. (NASDAQ:WDC)
YTD Returns: 15.2%
Number of Hedge Fund Holders: 85
Western Digital Corp. (NASDAQ:WDC) is a prominent developer and manufacturer of data storage devices and solutions. The company’s product range includes hard disk drives (HDDs), solid-state drives (SSDs), and external storage systems tailored for both consumer and enterprise markets. Western Digital’s storage solutions find applications in personal computing, data centers, and cloud storage services, meeting the increasing global demand for reliable and high-capacity data storage.
Western Digital Corp. (NASDAQ:WDC) has outperformed SOX Index by approximately 12.1% thus far in 2025, with YTD returns of 15.2%. During its Q2 2025 earnings call, management emphasized the company’s robust performance in the HDD sector, with data center revenue hitting an all-time high, driven by the advanced Ultra SMR technology. In Q3, while demand from data centers and mobile markets is expected to remain robust, bit shipments are projected to decline due to reduced demand in PC OEM and consumer end-markets. The first half of 2025 will be impacted by inventory adjustments, but a recovery is anticipated in the latter half, fueled by increased momentum in AI-driven PC ramps during the Windows refresh cycle.
A Citi analyst reaffirmed her Buy rating for the company with an $80 price target, citing the strong demand for high-capacity HDDs, constrained supply, and extended lead times. She also noted signs of stabilization in the NAND market, which could benefit Western Digital Corp. (NASDAQ:WDC)’s flash memory business. Furthermore, she believes that challenges like slower growth in consumer devices and inventory adjustments should ease in the coming months and coupled with expected growth in AI, should aid bit shipments growth.
8. Seagate Technology Holdings Plc (NASDAQ:STX)
YTD Returns: 16.9%
Number of Hedge Fund Holders: 52
Seagate Technology Holdings Plc (NASDAQ:STX) is a prominent provider of data storage solutions, specializing in the design, manufacturing, and distribution of hard disk drives (HDDs) and solid-state drives (SSDs). Their products serve a wide array of applications, ranging from personal storage and computing to enterprise data centers and cloud storage infrastructures.
Seagate Technology Holdings Plc (NASDAQ:STX) has outperformed the benchmark SOX Index by approximately 13.7% in 2025, with year-to-date (YTD) returns of 16.9%. Seagate’s management asserts that data center architects will persist in adopting both hard disk drive storage and compute-oriented memory technologies such as NAND flash to address the breadth of their workloads, serving as a long-term growth catalyst. As a result, the company experienced increased demand across nearly all its end-markets in Q2 2025 (FY ending June), with the most significant growth seen in the cloud sector, leading to a 50% YoY (7% sequential) revenue increase. Profitability also improved during the quarter, resulting in an adjusted EPS of $2.0 compared to $0.12 in Q2 2024. Management also stated that the production issue causing supply constraints for the March quarter has been resolved. The company’s recently announced acquisition of Intevac Inc. (NASDAQ:IVAC) is also expected to bolster its HAMR business, which remains a growth area.
Seagate Technology Holdings Plc (NASDAQ:STX)’s rating was upgraded to Buy from Hold by a Benchmark analyst on January 22, with a price target of $120. While the analyst acknowledged the impact of supply issues on the next quarter, they believe that this should be offset by strong cloud and Generative AI demand.
7. Micron Technology Inc. (NASDAQ:MU)
YTD Returns: 17.4%
Number of Hedge Fund Holders: 94
Micron Technology Inc. (NASDAQ:MU) designs, develops, manufactures, and markets memory and storage products, including dynamic random-access memory (DRAM), flash memory (NAND), solid-state drives (SSDs), and High Bandwidth Memory (HBM) globally. The company is well-positioned to capitalize on technological advancements in AI, 5G, autonomous vehicles, and data centers.
Micron Technology Inc. (NASDAQ:MU) has surged 17.4% in 2025, outperforming the SOX Index by 14.3%. The company reported a remarkable 400% year-over-year and 40% sequential growth in its Q1 2025 (November quarter) data center revenues, which now make up over 50% of the revenue mix. While the bit shipment outlook is weaker for Q2 due to customer inventory adjustments, management anticipates an improvement by spring and an acceleration in bit volumes in the second half of the year.
During the quarter, the company focused on improving yields and capacity, leading to more than a doubling of its HBM revenue sequentially. By 2028, the company expects the HBM total addressable market (TAM) to grow fourfold from the $16 billion level in 2024 and to exceed $100 billion by 2030. Management has also raised the HBM market TAM forecast to now surpass $30 billion in 2025.
Micron Technology Inc. (NASDAQ:MU)’s HBM3E 8-high memory is a key component in NVIDIA’s Blackwell B200 and GB200 platforms. The company is currently scaling up production of its HBM3E 12-high, which offers a 20% reduction in power consumption compared to HBM3E 8-high memory from competitors while delivering 50% greater memory capacity.
6. Intel Corp. (NASDAQ:INTC)
YTD Returns: 24.0%
Number of Hedge Fund Holders: 83
Intel Corp. (NASDAQ:INTC) is a global leader in the design and manufacturing of microprocessors and semiconductor components. The company’s products power a wide range of computing devices, from personal computers to data centers and Internet of Things (IoT) applications. Intel is renowned for its innovation in CPU architecture and process technology.
With a 24% year-to-date (YTD) increase in share price, Intel Corp. (NASDAQ:INTC) has outperformed the benchmark SOX Index by 21%. This strong performance stands out, especially considering the volatile 2024, during which the company’s stock plunged by 60%. The renewed optimism in 2025 is largely driven by speculation surrounding potential strategic actions, including asset sales, spin-offs, a possible acquisition by another semiconductor giant, or private equity firms acquiring stakes in the company.
On February 18, the stock surged as much as 17% following a Bloomberg report indicating that buyout firm Silver Lake was exploring a majority stake in its subsidiary, Altera. While specific details remain undisclosed, Reuters estimated the deal could be worth $9 billion—significantly lower than the $17 billion Intel Corp. (NASDAQ:INTC) originally paid for Altera in 2015. The company’s management had previously signaled its intention to pursue a stake sale or an IPO for Altera, with a decision expected in early 2025. Despite its strong YTD performance, Intel’s stock has already surpassed the consensus target price of $21, implying a potential downside of 16%. A definitive resolution on these strategic discussions could further support the company’s valuation.
5. Rackspace Technology Inc. (NASDAQ:RXT)
YTD Returns: 31.2%
Number of Hedge Fund Holders: 15
Rackspace Technology Inc. (NASDAQ:RXT) offers a comprehensive suite of management and support services across private, hybrid, and hyperscale public cloud environments. Its portfolio includes application services, data management, colocation, managed hosting, professional services, and security and compliance solutions. The company operates 40 colocation data centers strategically positioned in key global markets.
On February 20, Rackspace Technology Inc. (NASDAQ:RXT) reported its Q4 2024 earnings, which were largely in line with market expectations. Revenue for the quarter declined 5% year-over-year (YoY) to $686 million, with decreases in both Public and Private Cloud segments. Operating profit also fell 13% YoY to $39 million, though the net loss per share improved to $0.02 from $0.04 in the prior-year period. Management highlighted strong sales execution, leading to a 14% YoY increase in FY 2024 bookings. While the company continues to face growth challenges, it is prioritizing higher-margin cloud and infrastructure services, leveraging its expertise in AWS, Google Cloud, and Microsoft Azure to drive long-term revenue expansion.
Rackspace Technology Inc. (NASDAQ:RXT) has delivered strong share price performance YTD, rising over 31% in 2025. On February 21, an Evercore ISI analyst maintained a Hold rating with a $3 price target, aligning with the current consensus estimate, which suggests only a 3.5% potential upside.
4. Applied Digital Corp. (NASDAQ:APLD)
YTD Returns: 39.4%
Number of Hedge Fund Holders: 41
Applied Digital Corp. (NASDAQ:APLD) is a specialized player in the data center industry, focused on designing, developing, and operating advanced digital infrastructure across North America. Initially a crypto mining company, it ceased mining operations in March 2022 and pivoted toward providing digital infrastructure solutions and cloud services, catering to the rapidly growing High-Performance Computing (HPC) and AI sectors.
While the majority of Applied Digital Corp. (NASDAQ:APLD)’s revenue comes from its Data Center Hosting (DCH) division, the company is actively working to expand the contribution of its Cloud Services (CS) segment, which delivers high-performance computing power for AI and machine learning applications. The DCH business provides infrastructure solutions for crypto mining clients by offering rentable space tailored to their power requirements, and it will need to scale capacity to meet rising demand. The company is also prioritizing the expansion of its HPC services for hyperscale clients through next-generation data center development. Currently, Applied Digital is constructing a 100 MW HPC facility in Ellendale, North Dakota, with plans to scale it up to 400 MW.
On February 13, an analyst from Lake Street reaffirmed a Buy rating on Applied Digital Corp. (NASDAQ:APLD) with a price target of $11. Prior to that, on January 28, Compass Point initiated coverage on the stock with a Buy rating and a $10 price target. Year-to-date, Applied Digital has surged 39.4% in 2025, significantly outperforming the SOX Index by more than 36%.
3. Super Micro Computer Inc. (NASDAQ:SMCI)
YTD Returns: 84.0%
Number of Hedge Fund Holders: 45
Super Micro Computer Inc. (NASDAQ:SMCI) specializes in the design, development, and manufacturing of high-performance and energy-efficient servers, storage systems, and networking solutions. Its products are widely deployed in data centers, cloud computing, AI, 5G, IoT, and edge computing. Given the high power consumption associated with high-performance computing, Supermicro’s liquid cooling solutions can lower operating expenses by up to 40% and enhance data center efficiency by improving Power Usage Effectiveness (PUE), a key metric comparing total facility power usage to IT equipment power consumption.
While Super Micro Computer Inc. (NASDAQ:SMCI) remains a significant player in the data center industry, its stock faced intense pressure in 2024 following allegations of financial and accounting irregularities by the now-defunct short-seller Hindenburg Research. From its peak in March 2024 to mid-November, the stock plummeted nearly 85% and ended the year with a modest 7.2% gain, underperforming the SOX Index by 12%.
In 2025, Super Micro Computer Inc. (NASDAQ:SMCI) has staged a remarkable recovery, surging 84% year-to-date. The rally began in early February when the company announced the date for its preliminary Q2 2025 results, signaling progress on its quarterly and annual filings. With such a sharp price movement in a short period, Super Micro Computer Inc. (NASDAQ:SMCI) currently has a consensus downside potential of 30%. Notably, on February 21, Goldman Sachs raised its price target from $32 to $36 while maintaining a Neutral rating.
2. GDS Holdings Limited (NASDAQ:GDS)
YTD Returns: 88.4%
Number of Hedge Fund Holders: 32
GDS Holdings Limited (NASDAQ:GDS) is a leading provider of high-performance, carrier- and cloud-neutral data center and IT infrastructure services across China and Southeast Asia. The company offers a broad range of solutions, including colocation, managed hosting, managed cloud services, and other value-added IT services. Its diverse clientele includes hyperscale cloud providers, large internet firms, financial institutions, telecommunications carriers, IT service providers, and major enterprises.
GDS Holdings Limited (NASDAQ:GDS) has seen an impressive stock performance in 2025, surging over 88% year-to-date to reach $44.8. This follows a remarkable 161% rally in 2024, making the continued upward momentum even more noteworthy. On February 21, Raymond James analyst raised the stock’s price target from $25 to $53 while maintaining an Outperform rating, citing expectations for more stable growth and significantly reduced risk.
The company benefits from strong demand for digital infrastructure in China, driven by AI adoption, cloud computing expansion, and enterprise digital transformation initiatives. GDS has been actively growing its data center footprint in key Chinese cities while also expanding internationally, particularly in Southeast Asia. Its international subsidiary, DigitalLand Holdings Limited, recently secured a $1.0 billion investment in convertible preferred shares from institutional private equity investors, valuing the business at approximately $3.5 billion. The capital infusion is expected to accelerate GDS Holdings Limited (NASDAQ:GDS)’s global expansion.
Following the Q3 2024 earnings release in mid-November, William Huang, Chairman and CEO of GDS, highlighted the company’s growth strategy, stating:
“In China, the accelerated move-in trend continued, as we executed our strategy of delivering the backlog while being selective on new orders. Internationally, our recent equity raise is a major step forward and positions us well to capture the tremendous opportunities for growth in the international markets.”
1. VNET Group Inc. (NASDAQ:VNET)
YTD Returns: 207.8%
Number of Hedge Fund Holders: 26
With an impressive 208% year-to-date surge in 2025, VNET Group Inc. (NASDAQ:VNET) stands as the top-performing stock in this category. The company is a leading pure-play data center provider in China, specializing in multi-carrier and multi-cloud internet data center (IDC) services. Its offerings include hyperscale and retail colocation, cloud services, and business virtual private network (VPN) services, catering to a wide range of enterprise and hyperscale clients.
The primary driver behind VNET Group Inc. (NASDAQ:VNET)’s extraordinary stock performance has been the rapid expansion of its AI-focused data center solutions to meet surging demand from hyperscalers and enterprise customers. As the exclusive operator of Microsoft Azure and Microsoft 365 services in China (via its subsidiary 21Vianet), and a key data center provider for companies like Alibaba, the company is well-positioned to benefit from increasing capital expenditures on AI infrastructure. VNET Group Inc. (NASDAQ:VNET) is strategically transitioning toward high-value, AI-driven computing services while enhancing operational efficiency to boost profitability.
As a dominant player in China’s data center industry, VNET Group Inc. (NASDAQ:VNET) continues to benefit from rising investments in scalable digital infrastructure. The company maintains a strong growth pipeline, with 297 MW of wholesale capacity currently under construction—88.4% of which is already committed under contract by customers. Additionally, it has 490 MW of capacity reserved for future expansion, ensuring it is well-prepared to capitalize on the growing demand for AI and cloud-based services.
While we acknowledge the potential of VNET to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VNET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
