Below we presented the list of top 5 data center stocks among hedge funds. For a detailed discussion as well as a more comprehensive list please see 10 Best Data Center Stocks To Buy Now.
5. GDS Holdings LTD (NASDAQ:GDS)
No of HFs: 47
Total Value of HF Holdings: $2.7 Billion
GDS Holdings LTD is a data center holding firm from China. The company markets colocation and managed services, as well as direct private connections to major public cloud platforms. During the third quarter of 2020, GDS reported a net revenue increase of 43% year-over-year to $224.6 million.
In an article, Brown Asset Fund mentioned GDS represents a compelling opportunity.
“In the most recent quarter, we acquired shares of GDS Holdings Limited, the leading data center developer and operator in China serving the premier Chinese cloud service, e-commerce, social media/gaming, and internet players. Although we have not invested in many foreign-based companies, we believe that GDS represents a compelling opportunity. Its business shares many similarities with Equinix, Inc., a U.S.- based data center operator that has been a profitable long-term investment for the Fund. In addition, our real estate research team has met extensively with GDS management over the course of the last few years and has built increased confidence in the team’s growth aspirations and its ability to successfully execute them.
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4. American Tower Corp (NYSE:AMT)
No of HFs: 62
Total Value of HF Holdings: $4.6 Billion
American Tower Corp is a global manufacturer of wireless communications infrastructure and next-generation wireless technologies. In the Fortune 500, the company was ranked 410th. During the third quarter of 2020, the company reported a revenue of $2.01 billion, a 3% increase year-over-year.
In an article, we mentioned RicerPark Advisors, LLC’s comments on AMT,
“American Tower: AMT shares were a top detractor on mixed second quarter results and management’s lowered full year revenue and EBITDA guidance (the company did, however, increase its AFFO/share guidance). The company guided to slower-than-expected U.S. property revenue growth due to a push-out of T-Mobile/Sprint capital spending. We believe U.S. activity should reaccelerate in the second half of this year, driven by T-Mobile/Sprint restarting capital spending, and into 2021, with Dish starting to ramp.”
In a separate article, Qualivian Investment Partners also mentioned had a few comments on the stock
“American Tower: AMT was the only slightly negative contributor to the fund’s performance in the third quarter. However, when it reported Q3 results in October, AMT bested revenue, EBITDA, and AFFO estimates in the quarter, while seeing an improving revenue growth trajectory in its international business, which has been one of the key tenets of our investment thesis in AMT. As key international markets continue to mature and densify their networks, the company should see accelerating revenue, EBITDA and operating cash growth from its portfolio of international towers. The company offered limited color on 2021 expectations, but management did say it expects T-Mobile (TMUS) to drive higher U.S. activity y/y predominantly from its 2.5GHz overlay, and that the timing of its Sprint site decommissioning might be more back-end weighted. We will monitor how much of an impact the Sprint tower sites churn might impact US revenues in the 2022-2024 timeframe, however, we expect the underlying growth in wireless data at 30%+ per year, plus the improving contribution from AMT’s international portfolio of towers in key growth emerging markets, will allow the company to continue to put up low to mid-teens growth over our investment horizon.”
3. Advanced Micro Devices (NASDAQ:AMD)
No of HFs: 71
Total Value of HF Holdings: $5 Billion
Advanced Micro Devices is an American multinational semiconductor company that manufactures computer processors and related technologies for business and consumer markets. The company is a major supplier of microprocessors. During the third quarter of 2020, AMD announced a revenue of $2.08 billion.
The top hedge fund holder of this stock is D.E. Shaw’s D E Shaw which had $1.049 billion invested in the stock at the end of September.
2. (NASDAQ:MU)
No of HFs: 79
Total Value of HF Holdings: $4.5 Billion
Micron Technology Inc is an American manufacturer of computer memory and computer data storage including dynamic random-access memory, flash memory, and USB flash drives. During the third quarter of 2020, the company reported a revenue of $5.44 billion versus $4.80 billion for the prior quarter.
Bonsai Partners highlighted a few stocks and MU was one of them. Check out this article, where they mentioned that MU’s share price is quite attractive
If there’s one investment mistake I’ve made multiple times in my career it’s accepting lower quality businesses available at attractive prices. I hope I’m not repeating this mistake again with Micron.
Acquiring a low-quality business at a great price usually does not lead to great investment returns, but neither does a great business at a low-quality price. You have to have both to earn superior returns.
I view Micron’s share price is quite attractive, but I also believe the business is transitioning from being mediocre to rather good. If that happens, attractive returns should follow.
Historically, Micron has not been kind to shareholders, and its shares are currently priced to reflect this. However, I believe that the nature of the DRAM industry has structurally changed for the better.
From a high-level, what makes Micron attractive is how essential it is to human progress. Without getting too professorial, humanity has had multiple waves of productivity gains over the past 12,000 years.
The first big improvement in productivity came from the agricultural revolution, which allowed humans to shift from hunting and gathering into high productivity farming and the division of labor.
1. Nvidia Corporation (NASDAQ:NVDA)
No of HFs: 82
Total Value of HF Holdings: $7.6 Billion
The number one best data center stock to buy now is Nvidia Corporation. The company is an American multinational technology company that manufactures graphics processing units for the gaming and professional markets. They also produce system-on-chip units (SoCs) for the mobile computing and automotive market.
In an article, we mentioned Wedge Partners’ comments on NVDA
“We sold our position in NVIDIA Corp to fund the purchase of First Republic Bank during the quarter. NVIDIA has blown past previous peak valuation multiples as demand for its gaming and datacenter graphical processing units (GPU) have soared due to a new product cycle, as well as easy comparisons to slow 2019 sales. Earlier this year, the Company launched its new Ampere line of GPUs. Hypercloud customers such as Amazon AWS, Google Cloud, and Microsoft Azure have been quick to deploy the new “A100” chips as thousands of artificial intelligence/machine learning (AI/ML)-focused startups, enterprises, and research institutes demand more parallel processing power to run larger AI/ML models. Over the past decade, NVIDIA has developed a substantial library of software to help developers more easily utilize NVIDIA GPUs for industry-specific and domain-specific applications, ensuring limited competition from accelerated computing chip rivals. However, despite these notable achievements, NVIDIA’s datacenter end-market is quite concentrated around a handful of very large hypercloud customers that have quickly changed their buying patterns in the past – and no doubt will in the future. We estimate the market is assuming around a +25% compounded annual growth rate of NVIDIA’s revenue for the next five years, along with aggressive margin expansion. While that outcome is not impossible, we expect the path to that kind of growth will not be linear and that the market will rerate the stock lower, similar to previous cycles, if growth decelerates in its datacenter GPU franchise. NVIDIA has also enjoyed a significant boost in demand for gaming GPUs; because stay-at-home orders are conducive to increased gaming consumption. Coupled with a recent product launch, NVIDIA’s gaming unit should see robust demand for several more quarters. Unlike previous cycles, we think NVIDIA should have limited exposure to any kind of correction in bitcoin mining. NVIDIA continues to be an excellent business, with enviable market positioning and is benefitting from secular demand for compute acceleration in datacenters. However, key to our sell decision, we believe the market has discounted much of NVIDIA’s potential in the stock’s current huge valuation and would rather invest in less well-understood opportunities that have similarly dominant franchises but exhibit more attractive valuations.”
And in a separate article, we mentioned Wedgewood Partner’s 2019 Thesis,
“NVIDIA is a pioneer in the development of the graphics processing unit (GPU) – a semiconductor traditionally utilized for rendering computer graphics – and has extended the GPU beyond the graphics domain into “general purpose computing.” We attribute NVIDIA’s success in general purpose computing to their proprietary computing platform and programming model, known as CUDA.
NVIDIA’s compute acceleration platform forms the backbone of a unique value proposition for steadily emerging compute-intensive applications, such as image processing, natural language processing, assisted driving, and ray tracing (the latter relates to the video game domain). The central processing unit (CPU) has been the workhorse of general-purpose computing for decades, as reliable, almost annual efficiency gains helped drive the development of increasingly complex computing applications. As those CPU efficiency gains have slowed over the past several years, developers have begun utilizing GPUs to accelerate applications. While a CPU usually has between a couple and a few dozen cores that are very fast at computation, that contrasts with a CUDA-based NVIDIA GPU that breaks a computation down across hundreds or even thousands of cores and completes it in a fraction of the time. Yet similar to CPUs, and much like Intel’s x86 standard, virtually any industry application can utilize NVIDIA’s GPUs to accelerate performance, thanks to CUDA’s programmability and rich library of software that has been developed for more than a decade.
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Disclosure: None.
