In this article, we will look at the 5 best data center stocks to invest in. If you want to read our detailed analysis of the data center industry which highlights key trends and major players, you can go to 10 Best Data Center Stocks to Invest In.
5. Western Digital Corporation (NASDAQ:WDC)
Number of Hedge Fund Holders: 45
Western Digital Corporation (NASDAQ:WDC) develops, manufactures, and sells data storage devices and solutions in the United States, China, Hong Kong, Europe, the Middle East, Africa, Asia, and internationally. The company’s product offerings include storage devices, data center systems, and cloud storage services, among others. Western Digital Corporation (NASDAQ:WDC) offers a range of data center storage platforms for enterprises, which include Ultrastar, OpenFlex, and RapidFlex. These products strengthen the company’s market position as a data infrastructure company and place it high among the best data center stocks to invest in.
On July 1, Benchmark analyst Mark Miller trimmed his price target on Western Digital Corporation (NASDAQ:WDC) to $65 from $85 but reiterated a Buy rating on the shares.
At the end of Q1 2022, 45 hedge funds held stakes in Western Digital Corporation (NASDAQ:WDC) worth $1.03 billion. This is compared to 50 positions in the previous quarter with stakes worth $1.28 billion.
In Q1 2022, Lyrical Asset Management raised its stakes in Western Digital Corporation (NASDAQ:WDC) by 4%, bringing them to $204.09 million. The investment covers 2.82% of Lyrical Asset Management’s 13F portfolio and the fund is the largest shareholder in the company.
4. Crown Castle International Corp. (NYSE:CCI)
Number of Hedge Fund Holders: 50
Crown Castle International Corp. (NYSE:CCI) is a specialized REIT that provides shared communications infrastructure in the United States. The company owns and operates more than 900 data centers that provide its clients with high-bandwidth connectivity. At the end of Q1 2022, 50 hedge funds held stakes in Crown Castle International Corp. (NYSE:CCI) worth $1.86 billion. This is compared to 38 positions in the previous quarter with stakes worth $2.07 billion.
Analysts are bullish on Crown Castle International Corp. (NYSE:CCI). On June 30, Jefferies analyst Jonathan Petersen raised his price target on Crown Castle International Corp. (NYSE:CCI) to $200 from $191 and upgraded the stock to Buy from Hold. Moreover, on July 1, KeyBanc analyst Brandon Nispel reiterated his buy-side Overweight rating on Crown Castle International Corp. (NYSE:CCI) but lowered his price target on the shares to $205 from $219.
Crown Castle International Corp. (NYSE:CCI) has been growing its dividends for the past 8 years and boasts a 5-year dividend CAGR of 8.97%. As of July 8, the company has $1.49 billion in free cash flows and is offering a forward dividend yield of 3.43%. Crown Castle International Corp. (NYSE:CCI) is therefore a dividend-paying data center stock to invest in.
In the first quarter of 2022, Fisher Asset Management raised its stakes in Crown Castle International Corp. (NYSE:CCI) by 6% and brought them to $509.78 million. As of March 31, Fisher Asset Management owns over 2.76 million shares of Crown Castle International Corp. (NYSE:CCI) and is the leading shareholder in the company.
3. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 50
American Tower Corporation (NYSE:AMT) has a portfolio of data centers that includes 6 edge sites spread across the U.S. and 2 metro facilities in Atlanta. The company owns Datasite and also owns CoreSite which operates 25 facilities in 8 markets. At the end of the first quarter of 2022, 50 hedge funds held stakes in American Tower Corporation (NYSE:AMT) worth $4.10 billion. American Tower Corporation’s (NYSE:AMT) portfolio of products that are contributing to the data center market, and establishing the company as a leader, justifies its inclusion in our list of the 10 best data center stocks to invest in.
Analysts are bullish on American Tower Corporation (NYSE:AMT). On June 30, Jefferies analyst Jonathan Petersen trimmed his price target on American Tower Corporation (NYSE:AMT) to $293 from $308 and reiterated a Buy rating on the shares. On July 1, KeyBanc analyst Brandon Nispel reiterated his Overweight rating on American Tower Corporation (NYSE:AMT) and lowered his price target on the shares to $283 from $286.
As of March 31, Akre Capital Management is the largest shareholder in American Tower Corporation (NYSE:AMT) and owns over 6.99 million shares. The fund’s stakes were valued at $1.75 billion, which covers 11.98% of its 13F portfolio.
2. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 83
Much like its rival NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD) is gaining popularity in the data center industry, primarily due to its 3rd generation EPYC processors which are currently one of the best-performing processors on the market for high-performance computing and are capable of handling intense workloads. AMD processors are being used by top cloud service providers such as Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG), which is why it is one of the best data center stocks to buy right now.
On June 30, Northland analyst Gus Richard reiterated his $95 price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) and upgraded the stock to Outperform from Market Perform.
At the end of Q1 2022, 83 hedge funds were long Advanced Micro Devices, Inc. (NASDAQ:AMD) with stakes worth $6.94 billion. This is compared to 69 positions in the previous quarter with stakes worth $6.74 billion. The hedge fund sentiment for the stock is positive.
In the first quarter of 2022, Ken Fisher’s Fisher Asset Management raised its stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD) by 23%, bringing them to $2.66 billion. As of March 31, Fisher Asset Management owns more than 24.38 million shares of the company and is the largest shareholder.
Here is what Carillon Tower Advisers had to say about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth-quarter 2021 investor letter:
“Advanced Micro Devices (AMD) supplies semiconductor chips for central processing units (CPUs) and graphic processing units (GPUs). The firm has been gaining share against its primary competitor in the datacenter server CPU space, as this rival has been unable to match the design and manufacturing capabilities of AMD and its partners. Investors are also looking forward to the closing of the previously announced merger with a semiconductor manufacturer that is another one of the portfolio’s holdings. The merger will increase AMD’s capabilities in the Field Programmable Gate Array (FPGA) chip space, and the combined company should possess the potential to win additional market share in the datacenter chip market.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 102
In addition to building world-class GPUs, NVIDIA Corporation (NASDAQ:NVDA) also offers data center solutions, primarily its accelerated computing platform, which allows enterprises to deploy and develop workloads of any size. Data centers are becoming NVIDIA Corporation’s (NASDAQ:NVDA) strongest business, which is why we are ranking it high among the best data center stocks to invest in. In old news, NVIDIA Corporation’s (NASDAQ:NVDA) data center business accounted for $3.75 billion of the company’s fiscal first-quarter 2022 revenue, up 83.1 percent year over year, and the GPU manufacturer’s gaming business accounted for $3.62 billion of its Q1 revenue, up 31.2% year over year.
Analysts are bullish on NVIDIA Corporation (NASDAQ:NVDA). On July 8, Tigress Financial analyst Ivan Feinseth trimmed his price target on NVIDIA Corporation (NASDAQ:NVDA) to $310 from $410 but maintained a Buy rating on the shares. Feinseth is bullish on NVIDIA Corporation (NASDAQ:NVDA) given its leading position in data centers, autonomous technology, and artificial intelligence, which will continue to drive the company’s growth. The analyst views a 90% upside to NVIDIA Corporation’s (NASDAQ:NVDA) shares from current levels.
At the end of Q1 2022, 102 hedge funds held stakes in NVIDIA Corporation (NASDAQ:NVDA) worth $6.35 billion. In the first quarter of 2022, Fisher Asset Management raised its stakes in NVIDIA Corporation (NASDAQ:NVDA) by 44%, bringing them to $1.99 billion. As of March 31, Fisher Asset Management owns more than 7.3 million shares of NVIDIA Corporation (NASDAQ:NVDA) and is the largest shareholder in the company.
RiverPark Funds, an investment management firm, mentioned NVIDIA Corporation (NASDAQ:NVDA) in its “RiverPark Long/Short Opportunity Fund” first-quarter 2022 investor letter. Here is what the firm said:
“Nvidia is the leading designer of graphics processing chips (commonly known as GPU’s- graphics processing units), required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming- focused chip vendor to one of the largest semiconductor/software vendors in the world, dominating the core secular growth markets of gaming, data centers and professional visualization. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. For 2021 the company generated 61% revenue growth to $27 billion, expanded its EBITDA margins to over 44% and generated over $8 billion of free cash flow. Over the past five years, the company has generated a cumulative $23 billion of FCF after cumulative capital expenditures of less than $4 billion.
We expect future growth to remain robust as NVDA chips and software are critical to many of the core technologies being adopted globally, including cloud computing, virtual reality and advanced artificial intelligence. As with NFLX, we took advantage of the over 40% recent drop in the company’s shares over the last several months to initiate a small position.”
You can also take a look at Top 10 Cloud Stocks To Buy and 15 Most Valuable Cloud Computing Companies.
