5 Best Data Center Stocks to Buy Now

2. Alphabet Inc. (NASDAQ:GOOG)

Market Cap as of March 27: $1.35 Trillion
Number of Hedge Fund Holders: 209

Google’s parent company, Alphabet Inc. (NASDAQ:GOOG) is one of the best data center stocks to buy now, as it owns dozens of massive computing units to run its services while also renting space for its hardware in other data centers globally. Google operates or is developing almost 30 data centers worldwide, supporting its current and future 44 cloud regions, which are built to be highly available, fault-tolerant, and concurrently maintainable.

Alphabet Inc. (NASDAQ:GOOG) ‘s investments in data centers and hardware are expected to pay off as it continues to improve its services. Despite the upgrade cycle, the business remains highly profitable, with an operating margin of nearly 30%. Alphabet Inc. (NASDAQ:GOOG) is returning excess cash to shareholders through stock buybacks.

Weitz Investment Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter. Here is what the fund said:

“Unfortunately, the performance story of the year is told by the Fund’s detractors. Now, weakening ad spending across all channels has added insult to injury, and concerns have spread to the other dominant digital ad player, Alphabet Inc. (NASDAQ:GOOG) — parent of Google and YouTube.

Meta, Alphabet, Amazon and CarMax were all top detractors for the quarter and calendar year periods (FIS and Liberty Broadband, respectively, complete the quarterly and calendar-year detractor lists.) To varying degrees, each is managing through cyclical challenges during a period of substantial investor pessimism. Drawdowns of this magnitude are painful, and it may be prudent for management to moderate the pace of some investments, but we remain encouraged by their long-term focus. In the short run, cutting spending indiscriminately to “defend earnings” may lessen the pain of a drawdown, but it seldom grows a company’s business value — the ultimate prize.”