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 GDS Holdings Limited (NASDAQ:GDS) 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).
A top level executive looking out of a skyscraper window, symbolizing the strategic decisions taken by the company.
GDS Holdings Limited (NASDAQ:GDS)
YTD Returns: 88.4%
Number of Hedge Fund Holders: 32
GDS Holdings Limited (NASDAQ:GDS) is a leading provider of high-performance, carrier- and cloud-neutral data center and IT infrastructure services across China and Southeast Asia. The company offers a broad range of solutions, including colocation, managed hosting, managed cloud services, and other value-added IT services. Its diverse clientele includes hyperscale cloud providers, large internet firms, financial institutions, telecommunications carriers, IT service providers, and major enterprises.
GDS Holdings Limited (NASDAQ:GDS) has seen an impressive stock performance in 2025, surging over 88% year-to-date to reach $44.8. This follows a remarkable 161% rally in 2024, making the continued upward momentum even more noteworthy. On February 21, Raymond James analyst raised the stock’s price target from $25 to $53 while maintaining an Outperform rating, citing expectations for more stable growth and significantly reduced risk.
The company benefits from strong demand for digital infrastructure in China, driven by AI adoption, cloud computing expansion, and enterprise digital transformation initiatives. GDS Holdings Limited (NASDAQ:GDS) has been actively growing its data center footprint in key Chinese cities while also expanding internationally, particularly in Southeast Asia. Its international subsidiary, DigitalLand Holdings Limited, recently secured a $1.0 billion investment in convertible preferred shares from institutional private equity investors, valuing the business at approximately $3.5 billion. The capital infusion is expected to accelerate GDS Holdings Limited (NASDAQ:GDS)’s global expansion.
Following the Q3 2024 earnings release in mid-November, William Huang, Chairman and CEO of GDS, highlighted the company’s growth strategy, stating:
“In China, the accelerated move-in trend continued, as we executed our strategy of delivering the backlog while being selective on new orders. Internationally, our recent equity raise is a major step forward and positions us well to capture the tremendous opportunities for growth in the international markets.”
Overall GDS ranks 2nd on the best performing data center stocks so far in 2025. While we acknowledge the potential of GDS 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 GDS 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.
