In an AI-driven world, data centers have become more critical than ever. While many people have heard of data centers, few fully understand what they entail. Simply put, a data center is a physical facility that houses an organization’s digital infrastructure, including servers, storage systems, and networking equipment. These facilities provide the computing power necessary for IT systems to function, serving as the backbone of modern digital infrastructure. They are essential to powering cloud computing, AI applications, and enterprise IT services.
With the rapid expansion of AI and high-performance computing, data centers have experienced exponential growth, a trend expected to continue for years. According to a February 5 report by the Dell’Oro Group, global annual data center capital expenditure (capex) is projected to exceed $1 trillion by 2029. Despite ongoing concerns about high power consumption, investment in AI infrastructure remains on a strong upward trajectory. Baron Fung, Senior Research Director at Dell’Oro Group, emphasizes this point:
“While AI spending has yet to yield the expected returns and efficiency improvements, long-term growth remains assured, driven by hyperscalers’ multi-year capex cycles and government initiatives such as the $500 billion Stargate Project. Although recent advancements in AI model training efficiency from DeepSeek have been disruptive, efforts to enhance efficiency and reduce the total cost of ownership in AI data centers have been underway for some time. Key areas of focus include advancements in accelerated computing through GPUs and custom accelerators, large language model (LLM) optimizations, and next-generation rack-scale and network infrastructure—all essential for enabling sustainable growth from both cost and power perspectives.”
A key challenge facing the industry was highlighted in KPMG’s “Data Center Supply Chain” report published in November 2024. The report warns of the sector’s heavy reliance on a small group of suppliers and contractors, which, despite improvements in procurement and operations, poses risks to capacity expansion, costs, innovation, and resilience—especially as demand accelerates. KPMG cautions that failure to address these vulnerabilities could destabilize the ecosystem. To mitigate these risks, the report recommends diversifying the supply chain by encouraging new market entrants and reducing dependence on a handful of general, mechanical, and electrical subcontractors.
In summary, while the data center industry is fundamental to technological progress, it is still evolving and adapting to shifting economic and demand dynamics. There is enough scope for more players to offer new and innovative solutions to support the technological advancements. The surging demand for data center facilities has attracted substantial investments from private equity and infrastructure funds, reinforcing expectations of resilient long-term growth. As a result, the data center sector remains a highly attractive space for investors.
With that in mind, let’s explore the 10 most oversold data center stocks to buy according to analysts.
A panoramic aerial view of a modern data center with high-performance computing.
Our Methodology
To determine the 10 most year-to-date (YTD) oversold data center stocks to Buy, 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 YTD returns for all identified companies and shortlisted the 10 worst-performing stocks. These were then ranked based on their potential upside, with the highest-upside stock 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 24.
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 Most Oversold Data Center Stocks to Buy According to Analysts
10. Lumen Technologies Inc. (NYSE:LUMN)
YTD returns: -18%
Potential Upside: 15%
Number of Hedge Fund Holders: 44
Lumen Technologies Inc. (NYSE:LUMN) is a telecommunications and network services company specializing in fiber-optic infrastructure, edge computing, and cloud connectivity solutions. Leveraging an extensive global fiber network, Lumen provides enterprise clients, government entities, and hyperscale cloud providers with high-bandwidth, low-latency connectivity. The company’s robust fiber backbone and edge computing capabilities play a critical role in data center interconnectivity, facilitating seamless data transfer between cloud platforms and corporate users.
Lumen Technologies Inc. (NYSE:LUMN) has experienced an 18% decline in its share price year-to-date. On January 27, the stock plummeted by 16% following the emergence of DeepSeek, a Chinese GenAI model, which triggered a widespread sell-off in AI and data center-related stocks, including Nvidia Corp. (NASDAQ:NVDA). Despite delivering an impressive 190% return in 2024, driven by partnerships with Microsoft, investor sentiment has turned more cautious in 2025. In addition to the broader market impact of the DeepSeek-driven downturn, unverified reports have suggested that Microsoft may be scaling back investments in AI infrastructure and data centers, raising concerns about the future outlook for Lumen Technologies Inc. (NYSE:LUMN).
Given these uncertainties, analysts are currently adopting a cautious stance on the stock, awaiting further clarity on the investment environment. Lumen Technologies Inc. (NYSE:LUMN) has a consensus potential upside of 15.5%, placing it at the lower end of our ranked list.
9. Advanced Micro Devices Inc. (NASDAQ:AMD)
YTD returns: -11%
Potential Upside: 30%
Number of Hedge Fund Holders: 96
Advanced Micro Devices Inc. (NASDAQ:AMD) is a semiconductor company that designs and manufactures high-performance computing and graphics solutions. Its product portfolio includes microprocessors, graphics processors, and system-on-chip (SoC) solutions for various applications, including data centers, gaming, and embedded systems. It has gained significant market share in the CPU and GPU markets and competes directly with Intel Corp. (NASDAQ:INTC) and NVIDIA Corp. (NASDAQ:NVDA).
Advanced Micro Devices Inc. (NASDAQ:AMD) has underperformed in both 2024 and 2025. After declining 18% in 2024, the stock has fallen an additional 11% so far in 2025. While the company has gained CPU market share in recent years, its growth in the AI sector has been comparatively slower, with weaker adoption of its advanced GPU products. As a result, AMD is often perceived as lagging behind competitors, particularly Nvidia.
Despite this, AMD continues to benefit from the expansion of the data center market. In its Q4 2024 earnings report released on February 4, the company posted a 69% year-over-year increase in data center revenue, fueled by strong demand for AMD Instinct GPUs—designed for AI and high-performance computing—and AMD EPYC CPUs. While AMD is working to enhance its AI software ecosystem through its ROCm open AI stack and strategic partnerships with hyperscalers, it has yet to pose a significant competitive threat to Nvidia.
The majority of analyst ratings remain positive on Advanced Micro Devices Inc. (NASDAQ:AMD), with market consensus indicating a strong 30% potential upside.
