On August 13, GDS Holdings Limited (NASDAQ:GDS) delivered an upbeat message on its second-quarter earnings call: AI-driven demand is accelerating, and the data-center operator is positioning for a much larger growth cycle. Founder, Chairman and CEO William Huang said GDS secured 260 megawatts of new bookings in Q2, taking first-half bookings to a record 470 megawatts. Management raised its full-year sales target to 1 gigawatt, signaling confidence that the momentum can continue. The company also secured another 600 megawatts of customer reservations during the year. GDS expects more than 1 gigawatt of new reservations by year-end, creating a potential pipeline for future binding commitments.
Bull Case: AI Is Changing the Mix
GDS is experiencing a structural surge in demand driven by China’s technology giants and emerging AI companies adopting advanced agentic models, creating robust needs for computing power and AI infrastructure. This momentum is reflected in first-half bookings secured across all three of the company’s largest hyperscale customers alongside new relationships with AI leaders, with demand evenly split between established markets and emerging hubs like Ulanqab, Horinger, and Shaoguan.
By midyear, GDS amassed over 2 gigawatts of binding commitments, 600 megawatts of reservations, and roughly 3 gigawatts of additional developable capacity. Furthermore, the backlog expanded from 450 megawatts at the start of the year to 757 megawatts by midyear, which management estimates could generate approximately RMB 1.6 billion in booked-but-not-billed adjusted EBITDA. Net move-ins reached 145 megawatts in the first half with another 90 megawatts anticipated in the second half, and move-ins for 2027 are projected to more than double 2026 levels.
Bear Case: Heavy Investment And Capital Needs
The rapid scaling of infrastructure requires significant upfront capital commitments, evidenced by GDS raising its full-year 2026 CapEx guidance from RMB 9 billion to RMB 10 billion to support its accelerating sales outlook and expanded development activity. This heavy investment cycle demands continuous external financing to sustain operations and capacity growth, underscored by the company completing RMB 4.9 billion in new debt financing and refinancing during the second quarter alone.
The Market Still Sees Risk
The growth story comes with a demanding valuation. GDS carries a forward P/E of 61.73 as of August 17, while short interest stands at 11.50% of float. Those figures suggest investors are pricing in substantial future growth and that skepticism remains significant. Still, the supplied sentiment data leans modestly positive, at 51 versus 47, suggesting the bullish case currently has a narrow edge.
Conclusion
For GDS, the key question is no longer whether AI is creating demand. The Q2 call suggests demand is already translating into bookings. The bigger test is whether GDS can convert that pipeline into capacity, revenue, and EBITDA while maintaining its financial discipline.
While we acknowledge the risk and potential of GDS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GDS and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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