10 Best Data Center Stocks To Invest In

In this piece, we will take a look at the ten best data center stocks to invest in.

The boom in information technology and computing has created new industries, several of which would have been unheard of just a couple of decades ago. One such industry is the data center sector, which caters to the needs of large and small businesses to handle their data storage and processing needs as well as generate insights from big data.

This industry is growing alongside the traditional personal computing industry, particularly due to the prowess of chip manufacturers which are now able to squeeze billions of transistors into a chip the size of a human thumbnail. This growth trend is evidenced by several research reports that list down the total addressable market (TAM), market size, and compounded annual growth rate (CAGR) for the data center industry.

For starters, a report from Research and Markets suggests that the industry will grow at a CAGR of 2% between 2019 and 2025. Additionally, a similar report from the same organization also lists the expected value of this market at $69 billion by the end of 2024 in the United States.

Building on this, Allied Market Research has taken a wager to estimate the size of this market and its growth trends as well. According to this research firm, the data center market stood at a whopping $187 billion by the end of 2020. From this, it is expected to grow at a CAGR of 10.5% to stand at a value of $517 billion in ten years by the end of 2030.

These growth figures are backed by equally impressive improvements in technological capabilities which have resulted in companies spending more on their infrastructure. For instance, Synergy believes that worldwide infrastructure spending on data centers grew by 10% annually in 2021 over 2020. The firm also outlines that total infrastructure revenue stood at $185 billion in 2021.

Some of the top companies on our list are those that supply equipment to a large number of enterprise customers, and the top three out of these are Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA).

Our Methodology

In order to pick out the best data center stocks, we looked at the industry as a whole to analyze underlying trends and the overall environment. After this, the companies that can stand to benefit from these were sifted out and they were then studied through their analyst reports, earnings, large shareholders, and hedge fund sentiment courtesy of Insider Monkey’s 912 hedge fund survey for the first quarter of this year in order to better understand their operating environment and performance.

Best Data Center Stocks To Invest In

10. SBA Communications Corporation (NASDAQ:SBAC)

Number of Hedge Fund Holders: 41

SBA Communications Corporation (NASDAQ:SBAC) is an owner and operator of wireless communications infrastructure in the Americas and Africa. This allows it to build carrier neutral networks that also include edge data centers and other technologies. The company is headquartered in Florida, United States.

SBA Communications Corporation (NASDAQ:SBAC)’s in building solutions also include the data center market as they offer companies existing infrastructure to serve their needs while avoiding the costs of setting up equipment. The ongoing shift to fifth generation (5G) communications should help the company grow since these in building solutions also cover the 5G market and enable SBA Communications Corporation (NASDAQ:SBAC) to integrate its edge data centers with its 5G services. Additionally, by the end of the fourth quarter of 2021, its site leasing revenue had grown by 9.4%, lending support to the demand for its venues.

By the end of this year’s first quarter, 41 of the 912 hedge funds polled by Insider Monkey had bought SBA Communications Corporation (NASDAQ:SBAC)’s shares.

SBA Communications Corporation (NASDAQ:SBAC)’s largest investor in our database is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 717,720 shares that are worth $246,967.

SBA Communications Corporation (NASDAQ:SBAC) joins Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA) in our list of hot data center stocks.

9. Western Digital Corporation (NASDAQ:WDC)

Number of Hedge Fund Holders: 45

Western Digital Corporation (NASDAQ:WDC) is one of the oldest technology companies in the world and it is responsible for manufacturing and selling storage devices for computing platforms such as data centers, personal computers, and others. The firm is based in San Jose, California, United States.

By the end of its second fiscal quarter of 2022, Western Digital Corporation (NASDAQ:WDC) revealed that it had boosted its revenues from the cloud computing sector. Roughly 40% of the revenue was from cloud computing, which marked a massive 89% annual growth in the segment as it indicated the strength of the company’s offerings in the crucial sector.

Evercore ISI increased the company’s share price target to $80 from $60 in June 2022, as it stated that Western Digital Corporation (NASDAQ:WDC) is taking a long term view of its future and there are significant synergies within its business model. 45 out of the 912 hedge funds surveyed by Insider Monkey for their Q1 2022 holdings had held a stake in the company.

Andrew Wellington and Jeff Keswin’s Lyrical Asset Management is Western Digital Corporation (NASDAQ:WDC)’s largest investor. It owns four million shares that are worth $204 million.

8. Crown Castle International Corp. (NYSE:CCI)

Number of Hedge Fund Holders: 50

Crown Castle International Corp. (NYSE:CCI) is an American company that is headquartered in Houston, Texas. It offers a wide variety of services to its customers, which include providing them with the ability to connect their data centers to cloud computing platforms.

Jefferies increased the company’s share price target to $200 from $191 in June 2022, as it highlighted that Crown Castle International Corp. (NYSE:CCI) has the potential to withstand the current stagflationary environment due to its strong pricing power. Insider Monkey took a look at 912 hedge fund portfolios for this year’s March quarter to discover that 50 had invested in the company.

Crown Castle International Corp. (NYSE:CCI)’s strength as a key data center stock is evidenced by the fact that the semiconductor industry slowdown continues to irritate large companies looking to build their infrastructure. This opens up the space for firms like Crown Castle International Corp. (NYSE:CCI), which offer outsourcing for cloud computing and data centers. A cherry on top for Crown Castle International Corp. (NYSE:CCI) is its dividend yield of 3.8%.

Crown Castle International Corp. (NYSE:CCI)’s largest investor is Ken Fisher’s Fisher Asset Management which owns 2.7 million shares that are worth $509 million.

7. American Tower Corporation (NYSE:AMT)

Number of Hedge Fund Holders: 50

American Tower Corporation (NYSE:AMT) is one of the world’s largest data center specialty real estate investment trusts (REIT). It is based in Boston, Massachusetts, United States and it offers a variety of services such as edge data centers to companies that want to outsource their big data needs.

Like Crown Castle International Corp. (NYSE:CCI), American Tower Corporation (NYSE:AMT) can also benefit from the shortages in the semiconductor industry that are making it difficult for firms to procure components to build their data centers. The company already makes its edge data centers available through Cloudnexion, and it has multiple similar facilities such as a 360 square foot data center in Texas. Compounding American Tower Corporation (NYSE:AMT)’s strengths for the data center industry is the fact that it is a global brand and is one of the few companies actively targeting the edge computing space.

Insider Monkey surveyed 912 hedge fund holdings for this year’s first quarter and discovered that 50 had bought American Tower Corporation (NYSE:AMT) shares.

Charles Akre’s Akre Capital Management is American Tower Corporation (NYSE:AMT)’s largest investor. It holds a $1.7 billion stake that comes through 6.9 million shares.

6. Intel Corporation (NASDAQ:INTC)

Number of Hedge Fund Holders: 76

Intel Corporation (NASDAQ:INTC) is the world’s largest semiconductor company, which naturally makes it an indispensable player in the data center industry as well. The company offers a host of central processing unit (CPU) and graphics processing unit (GPU) platforms that are used to crunch heavy data in data centers. It is headquartered in Santa Clara, California, United States.

Since it is the world’s largest chipmaker, and only one of a handful that can sell processors designed through the x86 microarchitecture, Intel Corporation (NASDAQ:INTC) is an essential data center play. It has the largest market share in the server segment, which stood at 97.1% as the first quarter of 2022 ended. The company’s scale makes it difficult for others to take away its crown, and it has grown its server market share over the past few quarters.

BofA cut Intel Corporation (NASDAQ:INTC)’s share price target to $39 from $47 in June 2022, as it worried about a rare downturn in the semiconductor industry. Crucially, the price target is unrelated to any fundamental weakness in Intel Corporation (NASDAQ:INTC)’s shares. Insider Monkey’s Q1 2022 912 hedge fund survey outlined that 76 had invested in the company.

Intel Corporation (NASDAQ:INTC)’s largest investor is Seth Klarman’s Baupost Group which owns 16 million shares that are worth $822 million.

Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA) are met by Intel Corporation (NASDAQ:INTC) in our list of top data center stocks.

5. Micron Technology, Inc. (NASDAQ:MU)

Number of Hedge Fund Holders: 78

Micron Technology, Inc. (NASDAQ:MU) is one of the world’s largest manufacturers of memory and storage devices for computing systems. Subsequently, its products are also extensively used in the data center and enterprise computing industries. The firm is headquartered in Boise, Idaho, United States.

Like other semiconductor firms, Micron Technology, Inc. (NASDAQ:MU) is also facing the brunt of inflationary pressures on its personal computing business segments. However, just like its peers, the company is also experiencing and projecting hefty growth in the enterprise computing segment. As part of its latest earnings release, the company stated that its data center segment will grow from representing 45% of its revenue today to 62% in 2025. Additionally, its networking data center revenues have grown by an average of $250 million since the start of 2019.

Evercore ISI reiterated its $90 share price target for Micron Technology, Inc. (NASDAQ:MU) in July 2022 outlining that the company has sound management practices in place. Insider Monkey’s Q1 2022 survey of 912 hedge funds pegged 78 as owning the company’s shares.

Micron Technology, Inc. (NASDAQ:MU)’s largest investor is David Goel and Paul Ferri’s Matrix Capital Management which owns 4 million shares that are worth $311 million.

4. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Holders: 83

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor designer that primarily designs and sells GPUs and CPUs to both consumers and enterprises. It is one of the few companies that sells both data center processors and GPUs, which has led it to gain a secure position in the market.

Advanced Micro Devices, Inc. (NASDAQ:AMD)’s strong presence in the data center segment is evidenced by its earnings results. For instance, its earnings for last year’s final quarter revealed that data center and enterprise computing had grown annually by a massive 75%, as companies sped up their infrastructure building. As if this wasn’t enough, the subsequent quarter saw AMD rake in $2.5 billion in the segment, to mark for an even stronger 88% annual growth.

Morgan Stanley noted Advanced Micro Devices, Inc. (NASDAQ:AMD)’s strength in the server segment in a June 2022 report, that set the company’s price target to $103 and pointed out that server growth will place it on a growth trajectory. 83 of the 912 hedge funds polled by Insider Monkey during this year’s March quarter had invested in the company.

Ken Fisher’s Fisher Asset Management is Advanced Micro Devices, Inc. (NASDAQ:AMD)’s largest investor. It owns 24 million shares that are worth $2.6 billion.

3. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 102

NVIDIA Corporation (NASDAQ:NVDA) is the world’s largest designer and seller of graphics processing units (GPUs). These products, initially used by gamers, are now widely used in data centers for modern day technologies such as artificial intelligence and machine learning. The company is headquartered in Santa Clara, California, United States.

Given that its products sit right at the heart of data center computing, it’s a no brainer that NVIDIA Corporation (NASDAQ:NVDA) is a key data center stock. For instance, its latest quarterly results revealed that data center products accounted for 45% of overall revenue, and NVIDIA Corporation (NASDAQ:NVDA)’s new Arm-based processors for this segment are yet to make their mark.

Additionally, the company has one of the strongest data center portfolios out there, as it targets six different data center products such as supercomputers, hyperscalers, and cloud computing. Due to this, NVIDIA Corporation (NASDAQ:NVDA) is estimated to rake in $22 billion in revenue from data centers by the end of 2024.

Insider Monkey surveyed 912 hedge fund portfolios for Q1 2022 and discovered that 102 had bought NVIDIA Corporation (NASDAQ:NVDA)’s shares.

Ken Fisher’s Fisher Asset Management is NVIDIA Corporation (NASDAQ:NVDA)’s largest investor through a $1.9 billion stake that comes courtesy of 7.3 million shares.

2. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 259

Microsoft Corporation (NASDAQ:MSFT) is one of the world’s largest technology companies that is primarily known for its Windows operating system. The firm also has a commanding position in the data center space through its Azure platform which has hundreds of data centers located all over the globe.

The Azure platform is one of the strongest of its type in the world and Microsoft Corporation (NASDAQ:MSFT) is believed to have brought in $10 billion from it for its fourth quarter of 2021. Analysts have bright estimates for its future growth as well, and expect growth to stand at 36% during Q2 2022, and at 37% and 42% for the next two quarters. Azure is also the strongest growing cloud services provider in the market, beating peers such as those from Amazon and Google. Finally, as a testament to its prowess, FedEx announced in January 2022 that it will partner with the company to build a cross platform logistics solution through Microsoft Azure.

As the first quarter of this year came to an end, 259 of the 912 hedge funds polled by Insider Monkey had invested in Microsoft Corporation (NASDAQ:MSFT).

Microsoft Corporation (NASDAQ:MSFT)’s largest investor is Ken Fisher’s Fisher Asset Management which owns 27 million shares that are worth $8.5 billion.

1. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 271

Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest electronic commerce platform that allows merchants to connect with buyers. However, it has expanded its presence into other technology segments as well, one of which is the data center segment.

Amazon.com, Inc. (NASDAQ:AMZN) has some of the world’s faster data center processors that are designed using the Arm microarchitecture. These are its Graviton lineup of processors which are believed to offer the highest performance per watt per rack slot in the industry. Its data center segment has the highest gross margin of 30% for the entire company as well, and Amazon.com, Inc. (NASDAQ:AMZN) was the leading cloud service provider by market share during last year’s fourth quarter in the form of a roughly 33% market share.

Redburn set a $270 price target for the company in June 2022, as it outlined that the AWS segment is worth $3 trillion on its own. 271 out of 912 hedge funds part of Insider Monkey’s research had bought Amazon.com, Inc. (NASDAQ:AMZN)’s shares in Q1 2022.

Ken Fisher’s Fisher Asset Management is Amazon.com, Inc. (NASDAQ:AMZN)’s largest investor through a $7.7 billion stake that comes via 2.3 million shares.