In this article, we will look at the 7 Underperforming Data Center Stocks to Buy According to Short Sellers.

Rapid AI adoption continues to drive demand for data centers. While GPUs and Memory chips take much of the limelight, AI training cannot simply be carried out using semiconductor chips alone. Several components need to come together to form a data center, which then serves the massive compute requirements driving the industry. This includes, among other things, networking equipment, cooling technologies, and power infrastructure to both power the equipment and to optimally utilize the power being delivered.

Talking to Schwab Network just one month ago, Lucas Downey of MoneyFlows commented on how the AI buildout was still going strong:

As these data centers continue to build out all over the country and all over the world, we’re going to face more bottlenecks, and that’s where the big opportunity is …there are multiyear runways for what’s going on in AI buildout, its not stopping anytime soon.

There are stocks that have become multibaggers in a very short period of time as a result of the above demand. At the same time, others have not fared so well, attracting short sellers as a result and creating opportunities for contrarian traders as well. We decided to unearth such stocks in our list of 7 underperforming data center stocks to buy according to short sellers.

Our Methodology

To come up with our list of 7 underperforming data center stocks, we first compiled a list of companies, using financial media and ETF holdings, that derived a significant portion of their revenue from the data center business. We then filtered out companies with at least a 5% short interest and a one-month share price decline of at least 10%. These companies are therefore underperforming in the short term while on short sellers’ radar as well. They have also reported recent investor-worthy news and are ranked in ascending order of their share price decline.

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. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).

Note: All share price data is as of market close on July 2, 2026.

7. Microchip Technology Inc  (NASDAQ:MCHP)

One-month Performance: -12.7%

On June 29, Vijay Rakesh of Mizuho Securities maintained his Buy rating on the Microchip Technology Inc  (NASDAQ:MCHP) stock along with a price target of $112. The analyst’s price target suggests a further 31% upside, which sits just below the median analyst upside on Wall Street of 41.8%.

The stock is down over 12% in the last one month, and this underperformance has happened despite an earnings report in May that propelled the stock to new all-time highs. Most recently, effective June 27, the stock has been reclassified across the Russell 1000, 3000, and Midcap indexes from Value to Growth. One way to look at the reclassification is that the perception of the company has changed from a value stock to a more growth-focused one. This could bring new liquidity as new funds take positions in the stock. While the company’s recent announcement of TimePictra 12 platform and US export license show some positivity, the risks around high inventory levels and margin pressure continue to pressure the stock price.

Microchip Technology Inc. (NASDAQ:MCHP) provides smart, connected, and secure embedded control solutions. Its semiconductor products business designs, develops, manufactures, and markets mixed-signal microcontrollers, development tools, analog and interface products, timing and connectivity devices, and memory products.

6. Lumentum Holdings Inc. (NASDAQ:LITE)

One-month Performance: -29.2%

On June 12, Saiyi He of CMB International Securities started coverage of Lumentum Holdings Inc. (NASDAQ:LITE) with a Buy rating. The analyst set a price target of $1070 for the stock. The firm’s assigned price target implies a further 46% upside from current levels. This upside is close to the median Wall Street analysts’ upside of 55%.

On a more bullish note, Northland Securities analyst Tim Savageaux raised the firm’s target price on Lumentum Holdings Inc. (NASDAQ:LITE) from $1000 to $1200 and kept an Outperform rating on the stock. The analyst believes sector-wide tailwinds will trigger the upside in LITE stock. He mentioned that recent positive comments from Nvidia CEO Jensen Huang have increased investor confidence in Marvell Technology. The positive AI data center results from HPE and strong spending on AI infrastructure by Alphabet Inc. also support a positive outlook for the sector. The analyst raised price targets on several communications technology companies, as demand for AI optical and networking is growing rapidly. Moreover, according to CNN’s compilation of analyst price targets, LITE stock has a median target price of $1130, which reflects a further 55% upside from the current share price, confirming that Tim Savageaux’s sentiment is shared across Wall Street.

Lumentum Holdings Inc. (NASDAQ:LITE) provides optical and photonic products. It operates through two segments: Cloud and Networking, which deals with optical and photonic components, modules, and subsystems, and Industrial Tech, which includes solid-state lasers, kilowatt-class fiber lasers, ultrafast lasers, diode lasers, and gas lasers.

5. Akamai Technologies Inc (NASDAQ:AKAM)

One-month Performance: -29.4%

On June 30, research firm Oppenheimer released an update on the Akamai Technologies Inc (NASDAQ:AKAM) stock, reiterating its Outperform rating and assigning a $180 price target. The price target reflects a 59% upside from here on.

One reason for such a high upside is the stock’s poor one-month performance of -28.8%. Oppenheimer believes the market is undervaluing the company’s cloud computing opportunity as AI inference starts to dominate AI workloads. By the end of 2028, the firm sees AKAM data center capacity as high as 100MW from 17MW at the end of 2025:

Our multi-stage DCF depicts our view that the market undervalues Akamai’s growth opportunity within cloud/AI inferencing.

Oppenheimer agrees with the Wall Street consensus of a healthy upside, as suggested by a 45% median upside according to 29 different analysts on Wall Street. However, it believes analysts are being too conservative and once the broader market realizes that, the stock could skyrocket.

While the Street leans on the positive side, we think its view is too conservative and undervalues the growth opportunity more than warranted,” Singh added. “As the growth opportunity is better understood, the stock should rally higher.”

This also makes the stock one of the most attractive underperforming plays out there and hence one of our top 7 underperforming stocks according to short sellers.

Akamai Technologies Inc (NASDAQ:AKAM) is a global cloud computing and cybersecurity company that has successfully pivoted to decentralized cloud computing solutions amid increasing AI-induced demand. The firm’s business can be divided into three distinct offerings of security solutions, compute solutions, and delivery solutions. It is headquartered in Cambridge, Massachusetts.

4. Applied Digital Corp (NASDAQ:APLD)

One-month Performance: -30.9%

Over the last month, Applied Digital Corp (NASDAQ:APLD) lost approximately 31% of its value. Despite a short rebound in mid-June, it remained under pressure and resumed its downward trend. Even with the recent decline, analysts remain optimistic about the company’s long-term prospects. On July 2, Craig-Hallum analyst George Sutton reiterated a Buy rating on the shares without assigning it any price target. However, among the 14 Wall Street analysts covering the stock, the stock carries a median price target of $74.5, suggesting an additional 125% upside from here on.

Further reinforcing the positive outlook, several analysts raised their price targets on Applied Digital Corp (NASDAQ:APLD) during the month of June. This includes Northland Securities, Lucid Capital, Lake Street, and Needham. On June 9, John Todaro from Needham raised the firm’s price target on the stock from $66 to $83 while keeping a Buy rating. The firm raised its price target following Applied Digital’s long-term lease agreement for its Delta Forge 2 AI-focused data center.

Needham analyst John Todaro stated in a note to clients:

We raise our PT as we believe APLD can continue to source new sites for the pipeline and execute additional leases. Further, we expect pricing improvements from here as the company looks to slate in new IG hyperscalers and neo-cloud customers.

Applied Digital Corp (NASDAQ:APLD) builds and operates digital infrastructure for AI and computing companies in North America. The company provides data centres and GPU computing solutions for businesses working in AI. It is headquartered in Dallas, Texas, and was founded in 2021 by Wes Cummins and Jason Zhang.

3. CoreWeave Inc. (NASDAQ:CRWV)

One-month Performance: -31.5%

Based on a report released on July 2, Northland Securities analyst Nehal Chokshi reaffirmed a Buy rating on CoreWeave Inc. (NASDAQ:CRWV) and the price target of $165. The firm’s price target reflects an additional 101% upside from here on, which is quite attractive for investors. Moreover, among the 39 Wall Street analysts covering the stock,  the highest price target stands at $302, representing a compelling 269% upside from current levels.

On the same day, BNP Paribas highlighted CoreWeave Inc.’s (NASDAQ:CRWV) strong position in the growing AI infrastructure market. According to the firm, demand for AI computing capacity continues to exceed supply, creating a favorable pricing environment across the industry. It also believes the company’s recent share price underperformance could present a catch-up opportunity as its execution improves in the second half of 2026.

BNP Paribas analyst Stefan Slowinski commented:

CoreWeave is simply further along in its capacity build relative to its neocloud peers (~1 GW of active power vs. ~200 MW at Nebius) and could soon reach a point where margin volatility moderates as net new deployments become a smaller percentage of the existing installed base. With a favorable pricing backdrop, effective use of asset-backed leverage, and a broadly declining cost of capital, we continue to view the risk/reward as attractive at these levels.

CoreWeave Inc. (NASDAQ:CRWV) is a software infrastructure company that offers the CoreWeave Cloud platform to deliver the automation & efficiency needed to manage AI infrastructure at scale.

2. IREN Limited (NASDAQ:IREN)

One-month Performance: -41.7%

According to a report released on July 1, Bernstein analyst Gautam Chhugani reiterated a Buy rating on the stock along with a $100 price target. The firm’s price target suggests an impressive 157% upside from the current levels. This upside is slightly higher than the median Wall Street analysts’ upside of 112% based on 17 analysts’ estimates.

After comparing leading AI companies, Bernstein said IREN continues to stand out for its strong profitability. According to the analyst Gautam Chhugani, the company currently has the highest profit margins among the neocloud firms covered in the report. The analyst said this advantage comes from its vertically integrated business model. The Sydney-based company manages key parts of its operations itself, including building data centers, acquiring land, operating its own GPU clusters, and securing energy agreements. This structure gives IREN Limited (NASDAQ:IREN) more control over infrastructure development and costs.

However, the firm noted that the company remains behind rivals such as Nebius and CoreWeave in scale and enterprise AI cloud capabilities.

IREN Limited (NASDAQ:IREN) is an Australia-based company that owns and operates renewable energy-powered data centers. Its facilities are specially optimized for Bitcoin mining, AI cloud services, and other power-dense computing.

1. Super Micro Computer Inc. (NASDAQ:SMCI)

One-month Performance: -45.7%

On June 24, Super Micro Computer Inc. (NASDAQ:SMCI) announced two strategic partnerships to strengthen its position in the virtualization, edge computing, and AI infrastructure markets. The company partnered with StorMagic to provide bundled edge infrastructure solutions that combine SMCI’s compact servers with StorMagic’s SvHCI virtualization platform. The solution is designed for remote offices, edge locations, branch offices, and small data centers across industries such as education, retail, healthcare, hospitality, and manufacturing.

According to the company, the joint offering is easier to deploy, provides high availability, reduced infrastructure costs, lower power consumption, and supports two-node architectures. The bundled solution is now available through Super Micro’s global channel partners and distributors.

Separately, Super Micro Computer Inc. (NASDAQ:SMCI) partnered with Odine to help develop AI infrastructure in Türkiye. Under the agreement, Odine will act as the company’s local partner for deploying high-performance GPU infrastructure, cloud platforms, AI factories, and next-generation data center solutions. Through these partnerships, the company aims to strengthen its position in faster-growing markets such as AI infrastructure, cloud computing, edge computing, and enterprise deployments.

Super Micro Computer Inc. (NASDAQ:SMCI) operates as a seller and developer of server and storage solutions based on modular and open-standard architecture across Europe, the United States, Asia, and internationally. It provides liquid and air-cooled AI servers; SuperStorage systems; embedded (5G/IoT/Edge) systems; SuperBlade, MicroBlade, FlexTwin, GrandTwin, and BigTwin blade and multi-node systems; Hyper, CloudDC, and WIO and rackmount systems; and MicroCloud server systems.

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