We recently compiled a list of the 30 Best and Worst Data Center Stocks. In this article, we are going to take a look at where Digital Realty Trust, Inc. (NYSE:DLR) stands against the other data center stocks.
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).
A close-up view of a technician installing a server in the data center facility, representing the reliable services provided by the company.
Digital Realty Trust, Inc. (NYSE:DLR)
Upside Potential: 15%
Number of hedge funds: 52
With over 310 data centers across more than 25 countries, Digital Realty Trust, Inc. (NYSE:DLR) stands as a leading provider of data center, colocation, and interconnection solutions. Its connectivity platforms, ‘PlatformDIGITAL’ and ‘ServiceFabric,’ differentiate it by enabling customers to deploy their critical infrastructure globally, manage capacity, and scale, ensuring seamless connectivity and robust performance. Size-wise, it is the 7th largest publicly traded U.S. REIT, boasting strong future leasing momentum with $1.0 billion in bookings over the last twelve months and $859 million in current backlog (i.e., lease signed but not yet commenced) as of September 2024.
Digital Realty Trust, Inc. (NYSE:DLR) possesses substantial capacity – with an existing capacity of 2,900 MWs and a land bank that could increase total capacity to 6,700 MWs. Given its global presence and scale, the company is well-positioned to benefit from secular trends in AI and hyperscale demand. Supporting this view, on January 15, a Deutsche Bank analyst upgraded Digital Realty Trust, Inc. (NYSE:DLR) to Buy from Hold, raising the price target to $194 from $185. The analyst expects the company’s core funds from operations (FFO) per share growth to accelerate in the coming years.
The analyst noted that higher funding costs due to persistently higher rates are expected to be offset by diversifying funding sources, including equity, joint ventures, and the sale of non-core assets. While premium valuation is cited as a downside risk, Digital Realty Trust, Inc. (NYSE:DLR)’s growth is projected to help it significantly outperform its peers over the long term. A week prior to Deutsche Bank, a UBS analyst also upgraded Digital Realty Trust, Inc. (NYSE:DLR) stock to Buy from Neutral and significantly increased his price target to $205 from $147 previously.
Overall DLR ranks 22nd on our list of the best and worst data center stocks to buy. While we acknowledge the potential of DLR 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 DLR 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.
