5 Best Data Center Stocks to Buy Now

In this article, we will look at the 5 best data center stocks to buy now. If you want to read our detailed analysis of the data center industry, you can go directly to the 11 Best Data Center Stocks to Buy Now.

5. Oracle Corporation (NYSE:ORCL)

Market Cap as of March 27: $240.98 Billion
Number of Hedge Fund Holders: 65

Oracle Corporation (NYSE:ORCL) provides global solutions for enterprise information technology with its cloud computing service, Oracle Cloud Infrastructure (OCI), offering computing, storage, and networking services through data centers located in 22 countries and 34 locations.

Oracle Corporation (NYSE:ORCL)’s expansion in Oracle Cloud regions and the popularity of its key products and platforms, such as Oracle Autonomous Database, MySQL HeatWave, Java, and Oracle Middleware, are fueling the demand for additional data center capacity.

Oracle Cloud has 40 operational regions and 9 in development, totaling 49 regions soon. Each region comprises 1-3 physically separate data centers called availability domains, connected by a low-latency, high-bandwidth network. Oracle Corporation (NYSE:ORCL) aims to establish at least 2 cloud regions in every country where it operates, with 2 regions already established in the US, Canada, UK, France, South Korea, Japan, Brazil, India, Australia, and the UAE.

4. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Market Cap as of March 27: $154.84 Billion
Number of Hedge Fund Holders: 97

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor company that operates in four segments: Data Center, Client, Gaming, and Embedded. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s data center business saw strong growth in fiscal 2022, with revenue rising by 63% to $6 billion and operating income increasing by 86% to $1.8 billion. This segment is expected to continue expanding in 2023. As a result, the company stands fourth on our list of best data center stocks to buy now.

Advanced Micro Devices, Inc. (NASDAQ:AMD) provides data center solutions including the AMD EPYC processor line optimized for virtualization, cloud computing, and HPC workloads, and AMD Instinct Accelerators for machine learning and HPC. AMD ROCm is an open-source software stack for high-performance computing workloads. These solutions provide high performance, security, and scalability to help enterprises meet modern data center demands.

Citadel Investment Group is the company’s largest shareholder, with shares worth $424.78 million.

Here is what Baron Funds had to say about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2022 investor letter:

“During the quarter, we added to our position in Advanced Micro Devices, Inc. (NASDAQ:AMD), a global fabless semiconductor company focusing on high performance computing technology, software, and products. AMD designs leading high-performance central and graphics processing units (known as CPUs and GPUs) and integrates them with hardware and software to build differentiated solutions for customers. While the company is seeing weakness in its PC business in the short term, we continue to believe AMD will be one of the lead beneficiaries of growing data center infrastructure spending driven by expanded use cases for AI and cloud computing across its product portfolio. AMD’s largest share gain opportunity is in its data-center-server CPUs, which continue to take share from incumbent Intel given a superior total cost of ownership proposition driven by better performance per watt of energy consumption across many computing workloads. We also believe Xilinx, a recent acquisition, offers AMD diversification opportunities through which it can benefit from the broader proliferation of semiconductors into all aspects of the industrial and consumer economies.”

3. Amazon.com, Inc. (NASDAQ:AMZN)

Market Cap as of March 27: $1.01 Trillion
Number of Hedge Fund Holders: 240

Amazon Web Services (AWS) is a cloud data services platform provided by Amazon.com, Inc. (NASDAQ:AMZN), which allows users to buy data space as they scale and adjust their plan based on seasonal demand. Amazon Web Services (AWS) operates over 125 physical data centers in more than 20 countries, with plans to have a total of 34 regions available by the end of 2024. Each region contains 3 to 6 isolated locations called availability zones, which have independent power, cooling, and physical security, and are connected with a redundant fiber-optic network.

AWS is investing $35 billion in building data centers across Virginia to expand its cloud computing capabilities, creating 1,000 jobs. AWS is on pace to hit $100 billion in revenue this year and plans to launch 23 more Local Zones in metro areas globally.

ClearBridge Investments, an investment management company, mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2022 investor letter. Here is what the fund said:

“Growing macroeconomic concerns weighed on mega cap names in the portfolio, with consumer discretionary holding Amazon.com, Inc. (NASDAQ:AMZN) feeling pressure from a slowing macroeconomic environment that could weigh on e-commerce and AWS segments. The main detractors from absolute returns were positions in Amazon.com, Regal Rexnord, Apple, Brookfield Renewable and Progyny.”

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.”

1. Microsoft Corporation (NASDAQ:MSFT)

Market Cap as of March 27: $2.08 Trillion
Number of Hedge Fund Holders: 259

Topping our list of the 11 best data center stocks to buy now is Microsoft Corporation (NASDAQ:MSFT). The company’s global data center infrastructure is designed with defense-in-depth strategies and redundancy to ensure data center availability and protect cloud architecture. In addition, the infrastructure is distributed worldwide, providing thousands of online services with data residency, compliance, and resiliency options.

Here is what Ariel Investments had to say about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2022 investor letter:

“Enterprise software provider Microsoft Corporation (NASDAQ:MSFT) also traded lower, as higher interest rates and economic concerns have created headwinds for growth-oriented technology companies. We believe this price action runs counter to Microsoft’s solid fundamentals, competitive positioning and long-term business outlook. We continue to anchor on the company driving value creation by capitalizing on a broad and deep set of opportunities, most notably within hybrid cloud infrastructure. The platform continues to demonstrate share gains and strong multi-year purchase intent as enterprises transition to cloud based platforms. At current trading levels, we believe Microsoft’s risk/reward is skewed to the upside.”

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