We believe data centers are currently experiencing a remarkable growth phase as the demand for digital services, cloud computing, and broader GenAI applications increases significantly. In the hyperscale and colocation segments, an estimated 10 GW is projected to commence globally in 2025 (according to JLL Global Outlook). Market intelligence firm Statista forecasts the global data center market to reach $624 billion in 2029, up from $452 billion in 2025, with a CAGR of 8.4%. Meanwhile, a report by Boston Consulting Group (BCG) estimates that to meet the global demand for computing power, leading data center players will need to invest a staggering $1.8 trillion from 2024 to 2030. In essence, it’s a juggernaut poised to reshape how the world consumes and processes information.

There has already been substantial capital investment over the last 3-4 years, transforming the data center industry landscape. Additionally, merger and acquisition activity has surged, with many well-known players now privatized. For instance, three major deals occurred in 2021: KKR and Global Infrastructure Partners acquired CyrusOne for $15 billion, American Tower acquired Coresite for $10 billion, and Blackstone acquired QTS for $10 billion. Later, Switch Inc. was acquired for $11 billion by DigitalBridge and IFM in 2022. These deals and their valuations only underscore the future value of data center assets.

In exploring investment opportunities for this article, we also examined some smaller private operators with intriguing business models, capitalizing on the growing demand for digital infrastructure. One such company is LightEdge, which operates 14 data center locations across the U.S. with a capacity of 30 MW. They offer customized solutions and services, including colocation, hybrid and edge cloud, and managed services. Another notable player is Vantage Data Centers, a private operator owned by DigitalBridge and other investors. Vantage operates in 21 markets worldwide, boasting 23 million square feet of space and 2.6 GW of power.

Flexential is another prominent name, providing tailored hybrid IT solutions through its FlexAnywhere platform. This platform integrates colocation, cloud, connectivity, data protection, and managed and professional services, across three million square feet of data center space in 19 highly connected markets. A recent addition to the emerging data center companies is Fleet Data Centers, launched by Tract Capital at the beginning of 2025. This company aims to develop mega-scale data center campuses with capacities of 500 MW or more, specifically designed for single-user customers. Tract Capital, the founder, is a data center land acquisition and development company led by an experienced team of data center experts.

Beyond our typical U.S. focus, we discovered an interesting Norwegian company, Green Mountain Data Centers. They operate four data centers across Norway and the UK, all running on 100% renewable energy. This small player exemplifies the direction the world should take.

Our Methodology

To identify the 30 best and worst stocks, we conducted extensive research to compile a list of U.S.-listed companies. Our focus included pure-play data center companies and those with significant revenue exposure to this market, or companies critical to the data center sector. Alongside market leaders, we aimed to feature smaller and lesser-known companies, without any market capitalization criteria. It’s important to note that the ‘worst stock’ label in the title is based purely on the potential share price downside from current levels and does not reflect the fundamental quality of the company. Ultimately, the stocks were ranked in ascending order of their upside potential, with the stock having the highest upside potential ranked at the top.

Note: all pricing data is as of market close on January 27.

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).

30. VNET Group, Inc. (NASDAQ:VNET)

Downside Potential: -20%

Number of hedge funds: 13

VNET Group, Inc. (NASDAQ:VNET) is one of the leading pure-play data center providers. It is a Chinese internet data center services provider with a focus on multi-carrier and multi-cloud services. The company offers hosting and related services, including IDC (Internet Data Center) services (both hyperscale and retail colocation), cloud services, and business virtual private networks (VPN) services. These services enhance the reliability, security, and speed of its customers’ internet infrastructure. Operating in more than 30 cities across China, the company services a diversified and loyal customer base of over 7,000 hosting and enterprise clients.

VNET Group, Inc. (NASDAQ:VNET) exhibits strong business momentum with 90% of its total revenue being recurring and a churn rate below 1%. Its current wholesale capacity in service is 558 MegaWatts (MW). Additionally, it has a robust growth pipeline, with 297 MW of wholesale capacity under construction (88.4% already committed under contract by customers) and 490 MW of capacity held for future development (source: company data as of September 2024). The company has also signed a definitive agreement with Dajia Investment Holding Company (a subsidiary of Daija Insurance Group) for a pre-REITs fund to invest in hyperscale data centers in China.

Encouraged by its growth prospects, a Goldman Sachs analyst upgraded the stock in November 2024 from Neutral to BUY with a price target of $7.0. The analyst’s thesis was based on VNET Group, Inc. (NASDAQ:VNET)’s transformation from a traditional retail internet data center operator to a fast-growing China wholesale operator. With over 150% surge in share price since January 2024, the stock already trades around $7.0. Although the stock remains a consensus Buy with most analysts positive, the recent rally seems to have factored in the strong growth prospects, leaving little room for further upside, thus placing the stock near the bottom of this list.