15 Best Data Center Stocks To Buy According to Jefferies, Citi and Wall Street Analysts

9. GDS Holdings Limited (NASDAQ:GDS)

Average Analyst Share Price Target Upside: 43%

Average Analyst Share Price Target: $14.89

Number of Hedge Fund Investors  in Q1 2024: 16

GDS Holdings Limited (NASDAQ:GDS) is a Chinese data center colocation services provider. Jefferies raised its share price target to $16.69 from $16.32 and kept a Buy rating on the shares. This was based on the back of GDS Holdings Limited (NASDAQ:GDS)’s first quarter earnings, which were notable for a growth in its area serviced for data centers which marked a 12% annual growth. Since it’s a colocation company, GDS Holdings Limited (NASDAQ:GDS) is dependent on customer partnerships and the percentage of its area that is being used by operators. Additionally, the stock’s health is also dependent on the broader Chinese economy. China’s domestic AI industry is expected to see significant government interest because of its tensions with the US, the latest of which have seen OpenAI restrict its model APIs to Chinese users. This could see GDS Holdings Limited (NASDAQ:GDS) benefit from local government AI spending as well.

GDS Holdings Limited (NASDAQ:GDS)’s management commented on the key move in rates at its Q1 2024 earnings call where it shared:

“The key to restoring higher growth in China is the move-in rate. Over the past couple of years, we focused our sales efforts on opportunities with faster move-in schedules and reasonable pricing. Even though the market as a whole slowed down, we made good progress with winning this kind of business. The results of our efforts are now starting to become visible in our Gross Additional Area Utilized. In 1Q24, the gross move-in for China was 17,000 square meters, all of which was in Tier 1 markets. It’s the highest since 2020. Going forward, based on contractual commitments in the backlog, we expect gross move-in to continue at these higher levels. From the beginning of 1Q24, we stopped recognizing revenue and deducted 12,000 square meters from Area Utilized for three B-O-T data centers which we plan to transfer to the customer on an accelerated basis.”