We recently compiled a list of the 10 Best Performing Data Center Stocks So Far in 2025. In this article, we are going to take a look at where Applied Digital Corporation (NASDAQ:APLD) stands against the other data center stocks.
The rapid expansion of digital technologies and data-intensive applications, including artificial intelligence (AI), cloud computing, and enterprise digital transformation, is driving an unprecedented surge in demand for data centers and related services. In recent years, hyperscalers—large-scale cloud service providers (CSPs)—have been the primary force behind the growing need for AI-ready data centers due to the immense capacity required to support large foundational models.
A report published by McKinsey & Company in October 2024 projected that global data center capacity demand could increase annually by 19% to 22% between 2023 and 2030, reaching 171 to 219 gigawatts (GW). This represents a massive leap from the current demand of 60 GW. According to McKinsey, the industry would need to construct at least twice the total data center capacity built since 2000 in less than a quarter of the time to prevent a potential shortfall.
However, such tremendous growth won’t come without its own set of challenges. Power supply constraints are becoming a pressing concern. Stephen Byrd, Global Head of Sustainability Research at Morgan Stanley, discussed this issue in a CNBC interview, estimating that the U.S. could face a power deficit of 36 GW by 2028. To mitigate this, he highlighted the need for “de-bottlenecking solutions,” such as leveraging nuclear energy, converting cryptocurrency mining facilities, and deploying fuel cells to meet the soaring energy demands of data centers.
That said, there will be a shift in the power usage pattern as well. A January 2025 report from Boston Consulting Group (BCG) forecasts that hyperscalers will account for nearly 60% of the data center industry’s growth from 2023 to 2028, increasing their share of global power consumption from 35% to 45%. Meanwhile, enterprises that maintain their own on-premises data centers are expected to see their share decline from 10% to 5%, as companies continue migrating workloads to cloud and colocation providers. Colocation providers, which lease infrastructure and offer specialized cloud solutions, will account for the remaining 50% of power demand as hyperscalers increasingly rely on their services to scale operations efficiently.
Overall, the data center industry is undergoing a period of rapid expansion, with substantial investments and growth projected for years to come. While concerns over power consumption will remain a key focus, data centers have become essential to the digital economy, ensuring continued growth both domestically and in international markets.
Our Methodology
To determine the 10 best-performing data center stocks in 2025, we conducted in-depth research to compile a list of U.S.-listed data center companies. Our process involved analyzing relevant exchange-traded funds (ETFs), research reports, and proprietary databases to identify key industry players. We then calculated the year-to-date (YTD) returns for all the identified companies and shortlisted the top 10 based on their performance. These companies were subsequently ranked in ascending order, with those generating the highest YTD returns placed at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: all pricing data is as of market close on February 21.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An overhead view of a large-scale data center with rows of servers and blinking lights.
Applied Digital Corporation (NASDAQ:APLD)
YTD Returns: 39.4%
Number of Hedge Fund Holders: 41
Applied Digital Corporation (NASDAQ:APLD) is a specialized player in the data center industry, focused on designing, developing, and operating advanced digital infrastructure across North America. Initially a crypto mining company, it ceased mining operations in March 2022 and pivoted toward providing digital infrastructure solutions and cloud services, catering to the rapidly growing High-Performance Computing (HPC) and AI sectors.
While the majority of Applied Digital Corporation (NASDAQ:APLD)’s revenue comes from its Data Center Hosting (DCH) division, the company is actively working to expand the contribution of its Cloud Services (CS) segment, which delivers high-performance computing power for AI and machine learning applications. The DCH business provides infrastructure solutions for crypto mining clients by offering rentable space tailored to their power requirements, and it will need to scale capacity to meet rising demand. The company is also prioritizing the expansion of its HPC services for hyperscale clients through next-generation data center development. Currently, Applied Digital is constructing a 100 MW HPC facility in Ellendale, North Dakota, with plans to scale it up to 400 MW.
On February 13, an analyst from Lake Street reaffirmed a Buy rating on Applied Digital Corporation (NASDAQ:APLD) with a price target of $11. Prior to that, on January 28, Compass Point initiated coverage on the stock with a Buy rating and a $10 price target. Year-to-date, Applied Digital has surged 39.4% in 2025, significantly outperforming the SOX Index by more than 36%.
Overall APLD ranks 4th on the best performing data center stocks so far in 2025. While we acknowledge the potential of APLD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than APLD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
