In this article, we will take a detailed look at the 11 best data center stocks to buy according to analysts.
In the ever-evolving landscape of technology, data centers have emerged as the unsung heroes that underpin our digital world. These critical infrastructures are not just the backbone of the internet; they are the engine driving the exponential growth of data, cloud computing, and advanced digital services. The data center industry is on a trajectory of significant expansion, with the market size projected to reach an impressive $418 billion by 2030, according to estimates from IndustryARC. This represents a robust compound annual growth rate (CAGR) of 9.6% during the forecast period from 2023 to 2030. This remarkable growth is fueled by a combination of factors that are reshaping the data center landscape, making it a crucial sector for both technological advancement and investment opportunities.
At the heart of this growth is the increasing demand for hyper-scalability, sustainability, and automation in data centers. In today’s digital age, businesses and organizations require data centers that can scale rapidly to accommodate ever-increasing data volumes, support advanced technological applications, and provide reliable and efficient services. Hyper-scalability, which refers to the ability of data centers to scale up their resources rapidly and efficiently, is becoming a vital requirement as data usage continues to surge. This demand for scalability is driven by the rise of cloud computing, big data, and the Internet of Things (IoT), all of which require robust and flexible data center solutions.
Sustainability is another critical factor influencing the data center market. As environmental concerns become more prominent, there is a growing emphasis on creating data centers that are energy-efficient and environmentally friendly. Green data centers, which focus on reducing energy consumption and minimizing environmental impact, are gaining traction as both businesses and consumers become more eco-conscious. The Department of Energy highlights that data centers account for approximately 2% of all electricity used in the U.S., underscoring the need for more sustainable practices in the industry. Automation is also playing a significant role in transforming data centers.
Modern data centers are increasingly adopting automation technologies to enhance operational efficiency, reduce human error, and streamline processes. Automation in data centers includes everything from automated cooling systems to intelligent data management solutions, all of which contribute to more efficient and reliable operations. The market dynamics of data centers are further influenced by the adoption of advanced technologies such as Artificial Intelligence (AI), Machine Learning (ML), cloud computing, and edge computing.
AI and ML are revolutionizing data center management by enabling predictive maintenance, optimizing resource allocation, and enhancing overall performance. For instance, AI-driven systems can analyze data center operations in real-time, identify potential issues before they become critical, and automate corrective actions. This proactive approach not only improves operational efficiency but also extends the lifespan of data center equipment.
Cloud computing has become a cornerstone of modern IT infrastructure, and its growth is driving increased demand for data centers. As businesses and individuals continue to shift towards cloud-based services, the need for data centers that can support these services is growing. Cloud computing allows for the storage and processing of vast amounts of data in remote data centers, providing flexibility and scalability that traditional on-premise solutions cannot match.
Edge computing is another transformative technology impacting the data center industry. Edge computing brings data processing closer to the source of data generation, reducing latency and improving the performance of applications that require real-time data processing. This shift towards edge computing is driving the development of smaller, geographically distributed data centers that can support the growing demand for low-latency applications and services.
The impact of the COVID-19 pandemic on the data center industry cannot be understated. The pandemic accelerated the digital transformation of businesses and highlighted the critical role of data centers in supporting remote work, online services, and increased internet traffic. With fewer people out in public during the pandemic, global internet traffic surged as more people worked and engaged online from home. This increase in demand led to a 30-35% rise in data center capacity in 2021, as organizations sought to support remote work and ensure the continuity of their operations.
The pandemic also underscored the importance of data centers in maintaining business operations and delivering essential services. Data centers became the backbone of remote work, online education, telemedicine, and other critical services that became indispensable during the pandemic. As a result, the data center market experienced accelerated growth, and this trend is expected to continue as businesses and individuals increasingly rely on digital solutions.
Geopolitical events, such as the Russia-Ukraine crisis, have also impacted the data center industry. The ongoing conflict has led many companies to reassess their operations in the region, with some choosing to suspend or withdraw their services. For example, SAP SE announced in March 2022 that it would halt sales of new products in Russia and shut down all data centers in the country. This situation highlights the need for data center operators to have resilient and adaptable strategies to navigate geopolitical uncertainties.
Regionally, North America remains a dominant force in the data center market, holding a substantial market share. The region’s dominance is attributed to significant investments by major players and the high adoption of advanced technologies. In 2021, North America saw the launch or construction of over 100 data center projects, with major colocation service providers and hyper-scale operators leading the way.
The IT infrastructure segment holds the largest market share within the data center industry. This segment encompasses the hardware, software, and network components required to support data center operations. As businesses continue to migrate towards data center solutions for improved data management and operational efficiency, the demand for IT infrastructure is expected to grow. This growth is further fueled by the increasing adoption of automation and enhanced storage solutions.
Hyper-scale data centers are another significant segment within the industry. These data centers are designed to handle massive volumes of data and high computing power requirements. The rise in IoT-connected devices and the growing emphasis on processing large volumes of digital data are driving the demand for hyper-scale data centers. These facilities are equipped to support the high-performance needs of modern applications and services.
The emergence of green data centers represents a positive shift towards sustainability in the industry. Green data centers focus on reducing energy consumption and minimizing environmental impact. As businesses and consumers become more environmentally conscious, the demand for green data centers is expected to increase. This trend aligns with broader efforts to promote sustainability and address climate change.
Data security remains a critical concern for data centers, especially those handling sensitive information. According to industry reports, a significant percentage of corporate data centers worry about data security. Ensuring robust security measures is essential for protecting data and maintaining trust with clients and customers. The data center industry is undergoing a period of rapid growth and transformation, driven by technological advancements, increased demand for digital services, and a focus on sustainability.
As the digital landscape continues to evolve, data centers will play a crucial role in supporting the infrastructure needed for modern technology and services. The market’s growth is fueled by factors such as hyper-scalability, automation, and the adoption of advanced technologies, while challenges like data security and geopolitical uncertainties also shape the industry’s future.
For investors, the data center sector presents a promising opportunity, with the potential for significant returns as the industry continues to expand. Understanding the dynamics of the data center market, including the key trends and challenges, will be essential for making informed investment decisions and capitalizing on the growth of this critical sector. With that, let’s take a look at the best data center stocks to buy according to analysts.
Our Methodology
We compiled an initial list of 20 stocks from data center-related ETFs and online rankings. We then selected the stocks with the highest upside potential, as of September 16, and ranked them in ascending order of this metric.
At Insider Monkey we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
11. Equinix, Inc. (NASDAQ:EQIX)
Upside Potential: 1.40%
Latest Average Share Price Target: $883.71
Equinix, Inc. (NASDAQ:EQIX) is a leading digital infrastructure company, providing a platform that enables organizations to interconnect foundational infrastructure with speed and agility. As a major player in the data center sector, Equinix, Inc. (NASDAQ:EQIX) plays a crucial role in helping businesses deploy and scale digital services, making it a key stock to consider for data center investments. The company’s extensive global reach, with 264 data centers across 72 metros, uniquely positions it to capture opportunities in the expanding digital and AI landscape.
The Q2 2024 earnings report demonstrated Equinix, Inc. (NASDAQ:EQIX) robust financial performance, reinforcing its bullish outlook. Revenue for the quarter reached $2.2 billion, an 8% year-over-year increase, marking the 86th consecutive quarter of top-line growth. The company’s adjusted EBITDA rose by 17% compared to the same period last year, with strong AFFO (Adjusted Funds From Operations) per share growth as well. This sustained financial growth underscores Equinix’s ability to deliver market-leading returns on capital and scale its operations effectively.
Equinix, Inc. (NASDAQ:EQIX) xScale program continues to drive substantial demand, particularly from AI and cloud service providers. The company recently secured land and power for a new multi-hundred-megawatt xScale campus in Atlanta, highlighting its commitment to expanding its portfolio to meet growing AI infrastructure needs. Additionally, Equinix’s interconnection services saw 9% year-over-year growth, reinforcing its position as a critical player in enabling data center connectivity for enterprises and service providers.
Equinix, Inc. (NASDAQ:EQIX) global expansion strategy remains a key driver of growth. The company’s entry into new markets, such as Malaysia and the Philippines, and its existing stronghold in the Singapore hub, strategically positions it to capitalize on opportunities in the fast-growing Southeast Asian market. Furthermore, Equinix’s focus on sustainability, with initiatives like the heat export program in Paris, showcases its long-term commitment to responsible growth. With a strong balance sheet, deep customer pipeline, and consistent execution, Equinix, Inc. (NASDAQ:EQIX) is poised to continue its growth trajectory. Its solid fundamentals, including rising MR per cabinet and increasing demand for AI-ready data centers, make it a compelling investment in the data center sector.
Baron Real Estate Fund stated the following regarding Equinix, Inc. (NASDAQ:EQIX) in its first quarter 2024 investor letter:
“Following strong relative and absolute performance in 2023, we reduced our position in leading global data center operator, Equinix, Inc. (NASDAQ:EQIX), due to the Fund’s large position size and other compelling new investment ideas that we have been identifying. Equinix continues to be a core position in the Fund, and we remain optimistic about the long-term growth prospects for the company due to its interconnection focus among a highly curated customer ecosystem developed over the past 20-plus years, strong demand and pricing power, favorable supply backdrop, and evolving incremental demand vectors such as AI. We believe Equinix can continue to compound earnings at approximately 10% over the next few years and believe the prospects for strong shareholder returns remain compelling.”
10. VNET Group, Inc. (NASDAQ:VNET)
Upside Potential: 16.70%
Latest Average Share Price Target: $3.35
VNET Group, Inc. (NASDAQ:VNET) is a leading provider of data center and hosting services in China, making it an essential inclusion in any list of top data center stocks. With a range of managed hosting, cloud, and VPN services, VNET Group, Inc. (NASDAQ:VNET) caters to industries like IT, e-commerce, financial services, and more. The company’s extensive infrastructure, including both retail and wholesale data centers, allows it to support a variety of businesses, from small enterprises to large-scale cloud providers. This versatility, combined with the rising demand for data center solutions, positions VNET Group, Inc. (NASDAQ:VNET) as a key player in the sector.
In its Q2 2024 earnings report, VNET Group delivered strong financial results, reinforcing its standing in the data center industry. The company reported net revenues of RMB 1.99 billion, a 9.4% year-over-year increase, showcasing its consistent revenue growth. VNET Group, Inc. (NASDAQ:VNET) adjusted EBITDA also grew by 7.3% to RMB 574 million, reflecting efficient cost management and operational growth. A key driver of this success was the wholesale business, which saw an impressive 81% year-over-year increase in revenue. With a steady capacity of 332 megawatts and a utilization rate of 75.9%, VNET continues to capitalize on the growing demand for data center capacity.
VNET Group, Inc. (NASDAQ:VNET) robust fundamentals extend beyond revenue growth. The company boasts a solid cash position and an unused credit line, which provides ample liquidity for future growth and investments. Additionally, the company has been rapidly expanding its data center capacity, especially in its Ulanqab IDC Campus, which is expected to play a significant role in meeting the surging demand for AI-driven computing power. With a total planned IT power capacity exceeding 1.2 gigawatts, this cutting-edge facility highlights VNET Group, Inc. (NASDAQ:VNET) forward-thinking strategy.
The company’s commitment to innovation and sustainability is also evident in its advanced data center technologies, including high-performance cooling systems. These innovations position VNET Group, Inc. (NASDAQ:VNET) to capture future growth opportunities in AI and other high-performance computing sectors, making it a strong contender in the data center market.
09. Vertiv Holdings Co (NYSE:VRT)
Upside Potential: 19.10%
Latest Average Share Price Target: $102.13
Vertiv Holdings Co (NYSE:VRT) is a key player in the data center industry, providing critical digital infrastructure technologies and services globally. The company’s comprehensive offerings, including AC and DC power management products, thermal management solutions, and integrated rack systems, are fundamental to the operation of data centers, which serve industries like e-commerce, online banking, and cloud services. Vertiv Holdings Co (NYSE:VRT) broad product portfolio, along with its lifecycle management services and a global presence, position it as a strong contender in the expanding data center market, making it a compelling choice for investors looking to gain exposure to this sector.
In its second-quarter earnings report for 2024, Vertiv Holdings Co (NYSE:VRT) exceeded market expectations, reporting an EPS of $0.67, surpassing the anticipated $0.646. The company demonstrated solid financial growth, with organic sales increasing by 14%, driven by strong performance in the Americas, which saw a 17% rise. Vertiv’s success in securing large-scale orders contributed to a book-to-bill ratio of 1.4x, indicating sustained demand and a robust pipeline. The company’s adjusted operating profit reached $382 million, a significant improvement from the prior year, with operating margins expanding by 510 basis points to 19.6%. This performance underscores Vertiv Holdings Co (NYSE:VRT) effective cost management, improved operational efficiency, and strong execution of its growth strategy.
Vertiv Holdings Co (NYSE:VRT) financial health is further highlighted by its adjusted free cash flow of $333 million in Q2, showcasing its ability to convert profitability into cash flow. The company’s net leverage ratio of 1.8x is well within its targeted range, demonstrating a strong balance sheet and financial flexibility. Vertiv’s leadership has raised its full-year guidance across all key financial metrics, expecting organic growth of 13% and adjusted operating profit of $1.435 billion for the year, with continued margin expansion. With its expanding market share in the rapidly growing data center industry, and a strong emphasis on R&D and capacity expansion, Vertiv Holdings Co (NYSE:VRT) is well-positioned for sustained long-term growth, making it a top data center stock to consider.
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q2 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) a leading provider of critical digital infrastructure for data centers, contributed during the quarter. As an industry leader in data center cooling and power management, Vertiv is poised to benefit from AI-driven growth in data center spend. The NVIDIA partner network, strong industry relationships, and broad product portfolio that Vertiv maintains enables its participation in the creation of the technology roadmap for the future of the data center. In addition, Vertiv is investing in its capacity to serve this growing end market more effectively. The company also has an extensive global service network to aid customers as they grow. We believe the company has durable competitive advantages and a flexible balance sheet to benefit from the expected significant capital investment in data centers for years to come. Vertiv reported very strong results for the March quarter, with orders up 60%, which highlighted the strong demand it is seeing for its products. We sold some of our position into strength after the runup from the positive report, but still hold a major position in the Fund as we see considerable upside in the shares over time.”
08. NVIDIA Corporation (NASDAQ:NVDA)
Upside Potential: 19.30%
Latest Average Share Price Target: $142.10
NVIDIA Corporation (NASDAQ:NVDA) is a key player in the data center market, offering high-performance compute and networking solutions that cater to cloud service providers (CSPs), enterprises, and consumer internet companies. Its data center segment is crucial to its inclusion among the best data center stocks to buy. The company’s latest quarterly performance highlights robust growth driven by its AI and networking platforms, with the data center revenue reaching a record $26.3 billion, up 16% sequentially and 154% year-over-year.
NVIDIA Corporation (NASDAQ:NVDA) impressive Q2 2025 earnings call demonstrated strong financial performance, beating earnings expectations with reported EPS of $0.68, surpassing estimates of $0.645. The company’s total revenue hit $30 billion, up 15% sequentially and 122% year-on-year. A key growth driver was the surging demand for NVIDIA Hopper GPU computing and its networking platforms. Notably, compute revenue grew over 2.5 times and networking revenue more than doubled compared to the previous year.
The rise of generative AI has been a significant contributor to NVIDIA Corporation (NASDAQ:NVDA) data center expansion. Generative AI model training, inferencing, and other AI-powered workloads are driving demand for NVIDIA Corporation (NASDAQ:NVDA) computing solutions. The company’s Hopper architecture, which is widely adopted across CSPs and enterprises, is set to be followed by the next-generation Blackwell platform, expected to ramp up in Q4 2025. NVIDIA’s AI enterprise ecosystem is also benefiting from the adoption of its technology across various industries, including healthcare, education, and robotics.
NVIDIA Corporation (NASDAQ:NVDA) gross margins remain strong, with non-GAAP gross margins at 75.7% in Q2. The company’s cash flow from operations was $14.5 billion, highlighting its solid financial footing. Moreover, NVIDIA returned $7.4 billion to shareholders through share repurchases and dividends, further bolstered by a $50 billion share repurchase authorization. Given its robust fundamentals, dominance in the AI-driven data center market, and continued innovation in networking solutions, NVIDIA Corporation (NASDAQ:NVDA) is positioned as a top data center stock to buy, offering significant growth potential in the ever-expanding AI and cloud computing landscape.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence (AI), machine learning, and autonomous driving. The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefi ted from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future; Second, Nvidia posted another strong beat[1]and-raise quarter, where the company upped its F2Q25 revenue guidance above Street estimates, showcasing its dominant position in the buildout of today’s accelerated computing infrastructure.”
07. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Upside Potential: 27.00%
Latest Average Share Price Target: $193.45
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a key player in the data center space, making it a strong candidate for inclusion in our list of the 11 Best Data Center Stocks to Buy According to Analysts. AMD’s advanced semiconductor solutions are integral to powering the data centers that support today’s AI, cloud computing, and enterprise workloads. With its broad portfolio of data center-focused products, including EPYC CPUs and Instinct GPUs, Advanced Micro Devices, Inc. (NASDAQ:AMD) is increasingly chosen by hyperscalers and enterprises to handle intensive data processing tasks, making it a formidable competitor in the data center market.
In its Q2 2024 earnings call, Advanced Micro Devices, Inc. (NASDAQ:AMD) reported earnings per share (EPS) of $0.69, surpassing expectations of $0.678. This strong performance was primarily driven by its data center segment, which saw a staggering 115% year-over-year growth, generating $2.8 billion in revenue. AMD’s Instinct MI300 GPU shipments were a major contributor, alongside a robust double-digit increase in EPYC CPU sales. This underscores the company’s ability to capture market share from rivals by offering higher performance and energy-efficient solutions for hyperscale and enterprise workloads.
The company’s total revenue reached $5.8 billion, up 9% year-over-year, with data center sales accounting for nearly 50% of the overall sales in Q2 2024. Advanced Micro Devices, Inc. (NASDAQ:AMD) has expanded its gross margins by over 3 percentage points and posted a 19% growth in EPS. The consistent demand for its fourth-generation EPYC processors, especially from large clients such as Netflix and Uber, reflects the strong market acceptance of AMD’s solutions. Additionally, the availability of over 900 AMD-powered cloud instances has increased by 34% year-over-year, highlighting its growing footprint in cloud computing.
Looking ahead, Advanced Micro Devices, Inc. (NASDAQ:AMD) is positioning itself for continued growth with the introduction of its next-generation Turin family featuring Zen 5 architecture. With 192 cores and advanced memory technologies, Turin aims to solidify Advanced Micro Devices, Inc. (NASDAQ:AMD) leadership in the data center market. Advanced Micro Devices, Inc. (NASDAQ:AMD) ability to innovate and meet the ever-growing demands of AI and cloud services makes it a compelling stock for investors seeking exposure to the booming data center industry.
06. Microchip Technology Incorporated (NASDAQ:MCHP)
Upside Potential: 28.80%
Latest Average Share Price Target: $99.95
Microchip Technology Incorporated (NASDAQ:MCHP) has emerged as a compelling investment in the data center sector, despite recent challenges. As a leading provider of microcontrollers, analog, and FPGA solutions, Microchip Technology Incorporated (NASDAQ:MCHP) plays a crucial role in the rapidly growing data center industry, where demand for high-performance computing and advanced data processing solutions continues to rise. In its Q4 2024 earnings report, Microchip Technology Incorporated (NASDAQ:MCHP) demonstrated resilience in the face of a challenging macroeconomic environment. The company’s revenue for the quarter was $1.326 billion, reflecting a 24.9% sequential decline due to an inventory correction. However, the non-GAAP gross margin remained strong at 60.3%, underscoring the company’s efficient cost management. Operating income was also robust at 32.9%, indicating solid profitability despite revenue pressures. Non-GAAP earnings per share (EPS) of $0.57 met expectations, showcasing the company’s ability to maintain earnings amidst a turbulent period.
For the fiscal year 2024, Microchip Technology Incorporated (NASDAQ:MCHP) reported net sales of $7.634 billion, down 9.5% from the previous year. Yet, its non-GAAP gross margin of 65.8% and operating income of 43.9% demonstrate the company’s operational efficiency and effective expense management. The company’s non-GAAP net income of $2.698 billion and EPS of $4.92 reflect its strong profitability and ability to generate substantial earnings. Despite a temporary increase in net leverage to 1.57x, Microchip Technology Incorporated (NASDAQ:MCHP) financial health remains robust. The company’s cash flow from operating activities was $430 million in Q4, and its adjusted EBITDA stood at $503 million, indicating strong cash generation capabilities. Additionally, Microchip’s commitment to returning capital to shareholders is evident through its record cash return of $629.9 million in the form of dividends and share buybacks.
Looking ahead, Microchip Technology Incorporated (NASDAQ:MCHP) strategic investments in high-margin products and acquisitions, such as the purchase of VSI and Neuronix AI Labs, position it well for future growth. These acquisitions enhance its capabilities in automotive networking and AI-enabled edge solutions, key areas for data center applications. In summary, Microchip Technology Incorporated (NASDAQ:MCHP) solid financial metrics, strategic acquisitions, and ongoing capital returns make it a promising investment in the data center sector. The company’s resilience in adverse conditions and its focus on growth and innovation support a positive outlook for investors.
Invesco Growth and Income Fund stated the following regarding Microchip Technology Incorporated (NASDAQ:MCHP) in its Q2 2024 investor letter:
“Microchip Technology Incorporated (NASDAQ:MCHP): The chipmaker has suffered through a demand downturn that by some estimates is worse than the one during the 2008 global financial crisis. However, management estimates the second quarter of 2024 was likely the bottom, so we anticipate an inflection soon. The company has a broad product line that is sold to a diverse set of end markets, customers and channels. Additionally, the company has been deleveraging and has committed to returning capital to shareholders. We believe it will be well positioned when the semiconductor cycle turns positive.”
05. Applied Digital Corporation (NASDAQ:APLD)
Upside Potential: 37.90%
Latest Average Share Price Target: $8.40
Applied Digital Corporation (NASDAQ:APLD) stands out as a compelling data center stock due to its significant advancements in high-performance computing (HPC) and cloud services. Specializing in digital infrastructure solutions, Applied Digital operates through three key segments: Data Center Hosting, Cloud Services, and HPC Hosting. The company, formerly known as Applied Blockchain, Inc., has rebranded to reflect its broader focus and continues to expand its capabilities across North America. The company’s recent earnings call highlighted several positive trends and future growth potential despite some short-term setbacks. For Q4 2024, Applied Digital Corporation (NASDAQ:APLD) reported an impressive revenue increase to $43.7 million from $22 million in the same quarter the previous year. This growth was driven by the expansion of its data center hosting facilities and new cloud service contracts. The data center hosting segment alone contributed $26.9 million, showcasing its strong performance and reliability. Although the company faced challenges, such as power outages at its Ellendale facility, it has taken decisive steps to overcome these issues. The Ellendale facility’s transformer failures were resolved by replacing outdated equipment with advanced technology, resulting in a total of 286 megawatts of data center hosting capacity. This adjustment underscores the company’s commitment to maintaining robust infrastructure and ensuring operational efficiency.
Applied Digital Corporation (NASDAQ:APLD) Cloud Services segment also showed robust growth, generating $16.8 million in revenue and advancing its contracts for high-performance computing power for AI applications. The company’s efforts in expanding its HPC data centers are noteworthy, with 400 megawatts under development across North Dakota and a new 100-megawatt facility in Ellendale designed to support demanding HPC applications. Despite a net loss of $64.8 million for Q4 2024, which included substantial one-time expenses and challenges, the adjusted EBITDA stood at $4.8 million, up from $3.4 million the previous year. This indicates that the company’s core operations remain strong and its growth trajectory is promising.
Looking ahead, Applied Digital Corporation (NASDAQ:APLD) is poised for further growth with its strategic initiatives, including securing a significant lease agreement with a major hyperscaler and advancing construction on additional data center campuses. The company’s ability to attract large-scale customers and invest in cutting-edge infrastructure positions it as a strong player in the data center sector. Given these factors, Applied Digital Corporation (NASDAQ:APLD) represents a promising investment for those looking to capitalize on the growing demand for high-performance computing and cloud services.
04. Intel Corporation (NASDAQ:INTC)
Upside Potential: 63.00%
Latest Average Share Price Target: $32.04
Intel Corporation (NASDAQ:INTC) is a leading player in the data center sector, and despite some short-term challenges, its strategic positioning and robust portfolio make it a compelling investment. Intel Corporation (NASDAQ:INTC) focus on data centers is evident through its expansive range of products and innovations designed to enhance computing performance and efficiency. Intel Corporation (NASDAQ:INTC) Q2 2024 earnings call highlighted both progress and challenges. The company reported revenue of $12.8 billion, a slight increase sequentially but down 1% year-over-year. The gross margin for the quarter was 38.7%, with earnings per share (EPS) coming in at $0.02, below expectations. Despite these setbacks, Intel Corporation (NASDAQ:INTC) forward-looking strategies and financial metrics underscore its long-term potential in the data center market.
A significant driver of Intel Corporation (NASDAQ:INTC) future growth is its commitment to advancing its data center technologies. The launch of Intel’s Xeon 6 processors and upcoming Clearwater Forest products exemplifies the company’s focus on improving server performance. Xeon 6, which features E-core processors, offers up to 25% better performance per watt compared to competitors, demonstrating Intel’s capacity to deliver high-efficiency solutions for data centers. Intel’s emphasis on artificial intelligence (AI) and high-performance computing is also noteworthy. The introduction of its Core Ultra and Lunar Lake AI PCs, which have already doubled in volume sequentially, showcases Intel’s leadership in integrating AI capabilities into its product lines. These advancements not only cater to current market demands but also position Intel favorably for future growth. The company’s operational improvements are aimed at enhancing profitability and capital efficiency. Intel plans to reduce operating expenses by over $10 billion by 2025, reflecting a strategic shift towards greater cost discipline. Additionally, the company’s decision to cut capital expenditures by 20% in 2024 and 2025 demonstrates a prudent approach to managing resources amidst a fluctuating market.
Intel Corporation (NASDAQ:INTC) investments in cutting-edge process technologies, such as Intel 18A and Intel 4, are crucial for maintaining its competitive edge. The company’s aggressive node development schedule and commitment to process leadership promise to deliver significant long-term benefits, driving increased efficiency and cost savings. Overall, Intel Corporation (NASDAQ:INTC) strategic initiatives, coupled with its innovations in data center technologies, make it a strong candidate for investors looking to capitalize on the growth of the data center sector. Despite current profitability pressures, Intel Corporation (NASDAQ:INTC) long-term outlook and commitment to advancing technology position it well for future success.
03. Micron Technology, Inc. (NASDAQ:MU)
Upside Potential: 67.00%
Latest Average Share Price Target: $152.31
Micron Technology, Inc. (NASDAQ:MU), a global leader in memory and storage solutions, has demonstrated robust performance that positions it as a standout pick in the data center sector. The company designs and manufactures a broad range of memory and storage products through its Compute and Networking, Mobile, Embedded, and Storage business units. Micron’s offerings include high-speed dynamic random-access memory (DRAM) and non-volatile storage devices, marketed under its Micron and Crucial brands, which cater to various markets, including cloud servers, enterprise, mobile devices, and automotive applications.
In its Q3 2024 earnings call, Micron Technology, Inc. (NASDAQ:MU) reported impressive financial results, surpassing earnings expectations with an EPS of $0.62, well above the anticipated $0.48. Revenue for the quarter hit $6.8 billion, reflecting a significant 17% sequential increase and an 82% year-over-year surge. This growth was driven by strong price increases and an improved product mix, particularly in the data center sector, where revenue rose by over 50% sequentially due to escalating demand for AI-related products.
Micron Technology, Inc. (NASDAQ:MU) data center segment, which has become a focal point of its growth strategy, saw substantial expansion. The company’s advanced memory technologies, including high-bandwidth memory (HBM) and high-capacity DIMMs, contributed to this growth. Micron’s HBM products, which offer lower power consumption compared to competitors, are projected to generate several hundred million dollars in revenue for fiscal 2024 and billions in fiscal 2025. The company’s NAND flash products also performed well, with revenue increasing by 32% sequentially. This is a testament to Micron’s strength in providing high-performance solutions essential for data center operations and AI infrastructure.
The company’s forward-looking statements reflect a positive outlook for continued growth in data center demand. Micron Technology, Inc. (NASDAQ:MU) investment in leading-edge technologies, including advanced DRAM and NAND nodes, is expected to drive future profitability. Despite recent operational disruptions due to a Taiwan earthquake, Micron has maintained its cost reduction targets and continues to benefit from favorable pricing trends and a tight supply environment. Overall, Micron Technology, Inc. (NASDAQ:MU) strong financial performance, coupled with its strategic focus on high-margin, next-generation memory products, makes it a compelling choice for investors looking to capitalize on the growing data center and AI-driven market.
02. Super Micro Computer, Inc. (NASDAQ:SMCI)
Upside Potential: 72.80%
Latest Average Share Price Target: $790
Super Micro Computer, Inc. (NASDAQ:SMCI) is a prominent player in the data center industry, offering a wide array of high-performance server and storage solutions. As a global leader in modular and open-architecture systems, the company caters to various sectors, including enterprise data centers, cloud computing, artificial intelligence (AI), and 5G edge computing. Super Micro Computer, Inc. (NASDAQ:SMCI) products, including server management software, rackmount and blade servers, and liquid cooling solutions, make it a key provider in the rapidly evolving data center landscape. Its cutting-edge technology, particularly in direct liquid cooling (DLC) systems, allows it to optimize efficiency and performance in AI-driven environments, positioning it as a top pick for data center-related investments.
Despite missing Q4 earnings expectations, with reported earnings per share (EPS) of $6.25 compared to expected $8.12, Super Micro’s financial fundamentals remain robust. For fiscal year 2024, the company achieved an impressive 110% year-over-year revenue growth, reaching $14.94 billion. This strong revenue increase is driven largely by Super Micro’s leadership in AI infrastructure, with its Generative AI training and inferencing technologies playing a significant role. The company’s Q4 revenue surged to $5.31 billion, up 143% year-over-year, despite supply chain bottlenecks delaying approximately $800 million in shipments.
Super Micro Computer, Inc. (NASDAQ:SMCI) operating margin in Q4 was 7.8%, impacted by a higher mix of hyperscale data center business and increased costs associated with DLC component shortages. However, the company expects profitability to improve in fiscal 2025 as supply chain issues resolve, and new manufacturing facilities in Malaysia ramp up production.
The company’s focus on DLC technology is particularly noteworthy for data centers, as it offers higher performance, lower total cost of ownership (TCO), and improved energy efficiency. Super Micro Computer, Inc. (NASDAQ:SMCI) is already a key supplier to some of the largest AI SuperClusters worldwide. Its goal is to capture 25% to 30% of the global market for DLC solutions in the next 12 months. As the demand for more efficient AI-driven data centers grows, Super Micro Computer, Inc. (NASDAQ:SMCI) innovative solutions and strategic growth initiatives make it a strong candidate for investors looking at the data center sector.
01. IHS Holding Limited (NYSE:IHS)
Upside Potential: 129.80%
Latest Average Share Price Target: $7.10
IHS Holding Limited (NYSE:IHS) is a prominent player in the global data center industry, making it a strong candidate for inclusion in our list of eleven best data center stocks to buy according to analysts. As a developer, owner, and operator of communications infrastructure, IHS Holding Limited (NYSE:IHS) offers critical services in Sub-Saharan Africa, the Middle East, North Africa, and Latin America, supporting mobile network operators and internet service providers. Its shared infrastructure solutions, such as colocation, fiber connectivity, and rural telephony, position it as an essential partner in delivering data center services that facilitate connectivity and digital inclusion.
In its Q2 2024 earnings report, IHS Holding Limited (NYSE:IHS) demonstrated robust operational performance despite macroeconomic challenges, particularly the devaluation of the Nigerian Naira. The company reported a revenue increase of 4% quarter-over-quarter and a 35% rise in adjusted EBITDA, reflecting strong organic growth and efficient cost management. Notably, the company’s adjusted EBITDA margin improved to 57.6%, a significant year-over-year improvement.
One of the key drivers of IHS Holding Limited (NYSE:IHS) growth is its long-term partnerships, particularly with MTN, a major telecom provider. IHS Holding Limited (NYSE:IHS) recently renewed and extended its contracts with MTN in Nigeria and across multiple African countries, securing nearly $12.3 billion in contracted revenues with an average tenant term of over eight years. These contracts ensure a steady stream of revenue, providing the company with financial stability and operational predictability. Moreover, the introduction of power indexation in Nigeria helps mitigate the impact of fluctuations in diesel prices and currency exchange rates, further de-risking the business model.
While the Naira devaluation led to a 20% decline in reported revenue year-over-year, IHS Holding Limited (NYSE:IHS) underlying business remains strong, driven by a 69.3% organic growth rate, fueled by foreign exchange resets and CPI escalations. The company’s focus on reducing capital expenditures by 73% and improving cash flow generation also strengthens its financial position. With a consolidated net leverage ratio of 3.9x and a strategic review aimed at unlocking shareholder value, IHS Holding Limited (NYSE:IHS) is well-positioned for continued growth in the data center sector. Its solid fundamentals, long-term contracts, and focus on operational efficiencies make it a compelling investment choice.
While we acknowledge the potential of IHS to grow, our conviction lies in the belief that some 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 IHS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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