In this article, we will look at the 11 best data center stocks to buy now. If you want to skip our detailed analysis of the data center industry, you can go directly to the 5 Best Data Center Stocks to Buy Now.
Data Center companies worldwide posted record revenues in 2022, which reached $321.47 billion, according to a Statista analysis. The analysis anticipates the market to add more than $20 billion to the valuation by the end of this year. The 2022 performance is impressive, considering the global data center revenue was sub-$200 billion just two years ago.
According to a research by Allied Market Research, the data center market was worth $187.35 billion in 2020 and was expected to clock $517.17 billion by 2030. Interestingly, Statista's analysis reaches a valuation close to Allied Market Research's, positing that the global data centers market will generate approximately $410.40 billion in revenue by 2027. However, the former's CAGR is significantly smaller, at 4.66%, compared to Allied Market Research's 10.50%. The CAGR mismatch notwithstanding, there appears to be strong agreement that the data centers market has immense potential to break past the half trillion USD mark before the decade's end.
The CAGRs that several analyses are quoting at which the data center services market will grow in a particular forecast period are incredible. For example, Allied Market Research quotes 10.50% between 2021 and 2030, while Mordor Intelligence's figure is 13.69% between 2021 and 2026. In this light, a question arises: How will the market achieve an astronomical growth rate? In other words, what factors will drive the growth incredible growth?
For Mordor Intelligence, the growing demand for cloud services will carry much weight. The claim is perhaps in response to a Markets and Markets report, which established that the cloud computing market will expand at a 17% CAGR between 2022 and 2027, reaching $1,240.90 billion. Since data centers provide the critical infrastructure that keeps the cloud computing market running, any expansion that cloud computing posts naturally reaches data center services companies.
Besides cloud computing, increasing demand for e-commerce services will also spur growth in the data center services market. According to Statista, the revenue generated by e-commerce companies worldwide could reach $4.11 trillion at the end of this year. The organization makes a bolder claim that the market should be worth $6.35 trillion by 2027, thanks to an 11.51% CAGR. With the expansion of the e-commerce space comes the possibility of the data center services market's growth potential blowing up. This is because e-commerce customers want more personalized data and better recommendations for what products to buy, which is made possible by services undergirded by data centers.
As the growth potential of the data center services market expands, the companies involved in this space have more room to grow revenues. Consequently, with stronger financials comes an increased likelihood for the stocks to climb higher. The corporations whose businesses undergird the data center services market include Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Equinix Inc (NASDAQ:EQIX).
Best Data Center Stocks to Buy Now
Our Methodology
We scanned Insider Monkey's database of 943 hedge funds and picked 11 data center stocks with the highest number of hedge fund investors.
Cyxtera Technologies Inc (NASDAQ:CYXT) leads in data center colocation and interconnection services worldwide. It has more than 60 data centers in over 30 markets worldwide and is recognized as a leader in providing colocation and interconnection services.
According to Insider Monkey’s database, 11 hedge funds had a stake in Cyxtera Technologies Inc (NASDAQ:CYXT) as of Q4 2022. The total value of their holdings was $46.6 million.
Like Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Equinix Inc (NASDAQ:EQIX), Cyxtera Technologies Inc (NASDAQ:CYXT) is one of the best data center stocks to buy now.
Iron Mountain Inc (NYSE:IRM) is a company that offers data center and colocation services and is considered a top provider in this industry. Iron Mountain Inc (NYSE:IRM) has 21 data centers located across three continents, providing the necessary infrastructure and services for colocation and interconnection for its customers.
According to Insider Monkey’s data, Iron Mountain Inc (NYSE:IRM) was part of 21 hedge fund portfolios at the end of Q4 2022, compared to 23 in the earlier quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the company’s biggest stakeholder, with 535,256 shares worth $26.68 million.
Digital Realty Trust Inc (NYSE:DLR) is a REIT that provides data center, colocation, and interconnection solutions to leading enterprises and service providers worldwide.
There were 30 hedge funds in our database that held stakes in Digital Realty Trust Inc (NYSE:DLR)’s at the end of the fourth quarter, compared to 29 funds in the third quarter. Balyasny Asset Management is the company’s most significant stakeholder, with 743,672 shares worth $74.57 million.
Baron Real Estate Income Fund, in its Q4 2022 investor letter, made the following comment about Digital Realty Trust, Inc. (NYSE:DLR):
“Recently, we re-acquired shares in Digital Realty Trust, Inc. (NYSE:DLR). We believe the company’s valuation is highly compelling following the 43% correction in its share price in 2022. We would note, however, that we are closely monitoring the company because business execution and quarterly results have disappointed at various points in the last few years. We have limited the Fund’s exposure to the company with this in mind.”
Equinix Inc (NASDAQ:EQIX) is an American multinational company specializing in internet connection and data centers and is ranked 8th on the list of the best data center stocks to buy. EQIX provides businesses with access to important locations, partners, and opportunities to quickly and effectively expand their digital services, enhance customer experiences, and increase their overall value.
Deutsche Bank analyst Matthew Niknam raised Equinix Inc (NASDAQ:EQIX)'s price target to $760 from $725 and retained a 'Buy' rating on the shares on February 22.
According to Insider Monkey’s Q4 data, 38 hedge funds were long Equinix Inc (NASDAQ: EQIX), compared to 39 funds in the prior quarter. Ian Simm’s Impax Asset Management is the biggest position holder in Equinix Inc (NASDAQ:EQIX), with approximately 659,094 shares worth $431.3 million.
In its Q4 2022 investor letter, ClearBridge Investments, an investment management company, mentioned Equinix Inc (NASDAQ: EQIX). Here is what the fund said:
“Real estate holdings Equinix, Inc. (NASDAQ:EQIX) and Prologis (PLD) were standouts in a sector challenged by materially higher interest rates. Equinix is a best-in-class data center REIT with record leasing and backlog and a conservative balance sheet that should position it well in a downturn. Logistics real estate, meanwhile, has some of the most attractive market dynamics of all real estate subsectors, and Prologis is a clear leader within the group. Logistics real estate should continue to benefit from secular tailwinds of rising e-commerce penetration, ever faster delivery times, and supply chain resiliency (“just in case”).”
7. International Business Machines Corporation (NYSE:IBM)
Market Cap as of March 27: $112.3 Billion
Number of Hedge Fund Holders: 43
International Business Machines Corporation (NYSE:IBM) is a global company that offers integrated solutions and services through its subsidiaries. International Business Machines Corporation (NYSE:IBM) has a long history in computer technology and has been involved in hardware, software, middleware, and consulting services across generations.
International Business Machines Corporation (NYSE:IBM) was in 43 hedge funds' portfolios at the end of the fourth quarter of 2022. There were 40 hedge funds in our database, with IBM holdings at the end of the previous quarter.
American Tower Corp (NYSE:AMT) is a global REIT that owns, operates, and develops communication sites. American Tower Corp (NYSE:AMT) has expanded its reach in the cloud computing and digital infrastructure sectors by acquiring companies that own and operate data centers. In 2021, it acquired Coresite in a $10 billion deal, which helped the REIT diversify and gain exposure to the high-demand data industry. It is also considered one of the best data center stocks to buy now.
American Tower Corp (NYSE:AMT) owns 6 edge sites and 2 metro facilities in the US as a part of their data center portfolio, which includes CoreSite and Datasite. CoreSite operates in 8 markets and has 25 facilities.
American Tower Corp (NYSE:AMT) has a history of consistently increasing its dividend payouts. It has increased its dividend every quarter for the past 10 years. Most recently, AMT announced a quarterly cash distribution of $1.56 per share payable to stockholders of record on April 14, 2023. AMT has a ‘Strong Buy’ consensus rating with 12 buy ratings, 2 hold ratings, and 0 sell ratings.
At the close of the fourth quarter of 2022, 61 hedge funds held stakes in American Tower Corp (NYSE:AMT). These funds disclosed collective positions worth $3.38 billion in the company, down from $3.36 billion in the previous quarter with 62 positions. As of December 31, Akre Capital Management is the largest stockholder in the company and holds a position worth $1.48 billion.
Along with Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Equinix Inc (NASDAQ:EQIX), American Tower Corp (NYSE:AMT) is one of the best data center stocks to buy now.
ClearBridge Investments, an investment management company, mentioned American Tower Corp (NYSE:AMT) in its Q4 2022 investor letter. Here is what the fund said:
“Real estate and communication services sectors generated positive returns but lagged others within the Russell 1000 Value Index. The Strategy benefited from its underweight in the real estate sector with American Tower Corporation (NYSE:AMT) as its only holding. REITs are generally perceived to be interest rate sensitive, which negatively impacted American Tower’s recent stock performance. However, we remain confident in the company’s highly durable and predictable business model, which is supported by long-term customer contracts and insatiable wireless data growth.”
