In this article, we will take a look at 12 of the top data center companies in the US.
As the world becomes more digital, data growth is accelerating and companies associated with data centers could benefit. According to some estimates, 80% of the world will be online by 2024 and consumers could spend $10.5 trillion online in that year. As a result of the growth, new digital services markets are expected to emerge and demand for data centers is expected to continue to grow.
Data centers are physical and virtualized infrastructure that supports applications and workloads. Data centers are considered critical to many businesses and support various business applications such as data storage, productivity applications, e-commerce transactions, powering gaming communities and much more.
The data center industry has already increased substantially due to the growth in the cloud.
More recently due to the global pandemic, remote work became more popular and data center demand has increased further.
Due to various trends such as growth in edge computing, AI, and machine learning, analysts expect the data center industry to continue to grow in the future. According to an estimate by Technavio, the global data center market could grow by a CAGR of 21.98% from 2021 to 2026 with incremental growth of $615.96 billion, with the US accounting for a substantial part of that growth. Given that many US companies are global, many US data center companies could also benefit from global demand growth.
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Methodology
For this list, we took 12 of the top data center companies in the USA and provided the number of hedge fund holders in our database who held shares in the same stock at the end of Q2 2022.
We also provided the 2021 revenue of each company based on data from Macrotrends.net.
Because many companies on this list sell both data center products and services as well as other services, our list was subjective and not ranked based on 2021 revenue alone.
Top 12 Data Center Companies in the USA
12. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 33
2021 Revenue: $4.428 billion
Digital Realty Trust, Inc. (NYSE:DLR) owns, acquires, develops and operates data centers and is focused on providing data center, colocations, and interconnection solutions for its customers across a range of industries. Given its growth, Digital Realty Trust, Inc. (NYSE:DLR) has increased its dividend for 17 straight years and has had a 10% CAGR in core FFO per share growth since 2005. The company is also the 8th largest publicly traded US REIT and ranks among our list of Top 12 Data Center Companies in the USA.
Like many other stocks, Digital Realty Trust, Inc. (NYSE:DLR) hasn’t done well this year with shares down 44% year to date.
On September 23, Brendan Lynch of Barclays also downgraded the stock to ‘Underweight’ from ‘Equal Weight’ and set a price target of $91, down from the previous $126. Lynch cites macro and industry wide factors that could affect growth and the company’s valuation.
33 hedge funds in our database of almost 900 hedge funds held shares in Digital Realty Trust, Inc. (NYSE:DLR) at the end of Q2 2022 with Renaissance Technologies among the top five hedge fund holders.
11. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Holders: 19
2021 Revenue: $4.492 billion
Iron Mountain Incorporated (NYSE:IRM) is a global leader in innovative storage, asset life-cycle management, as well as information management services. The company’s services include data centers as well as digital transformation, secure records storage, and information management. Due to its growth, Iron Mountain Incorporated (NYSE:IRM) has had 9 consecutive years of dividend increases. In Q2, Iron Mountain Incorporated (NYSE:IRM) achieved 30% revenue growth in its data enter division including 24% orgnaic storage rental revenue growth.
On September 12, Steve Sakwa of Evercore ISI set a $63 price target on Iron Mountain Incorporated (NYSE:IRM), up from the previous $57. Sakwa also has an ‘Outperform’ rating.
19 hedge funds in our database owned shares of Iron Mountain Incorporated (NYSE:IRM) at the end of the second quarter of 2022 with Millennium Management among the leaders.
10. Equinix, Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 38
2021 Revenue: $6.636 billion
Equinix, Inc. (NASDAQ:EQIX) is a digital infrastructure company that offers a wide variety of services including data centers. In terms of data centers, Equinix, Inc. (NASDAQ:EQIX) owns and operates a network of over 240 International Business Exchange data centers located in 70 major metros globally. The company’s data centers provide services to more than 260 of the world’s fortune 500 companies and has over 10,000 customers.
On September 23, Brendan Lynch of Barclays downgraded Equinix, Inc. (NASDAQ:EQIX) to ‘Equal Weight’ from ‘Overweight’ and lowered his price target to $674 from $822. Although the company has ‘strong pricing power relative to peers’, Lynch sees 5.8% annual funds from operations growth through 2024.
38 hedge funds that Insider Monkey tracks owned shares in Equinix, Inc. (NASDAQ:EQIX) at the end of the second quarter of 2022 with AEW Capital Management owning 373,148 shares.
9. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 52
2021 Revenue: $9.357 billion
American Tower Corporation (NYSE:AMT) is one of the world’s largest global REITS and is an owner, operator, and developer of multitenant communications real estate, which includes data centers. It also ranks among our list of Top 12 Data Center Companies in the USA.
On September 8, Philip Cusick of JPMorgan reiterated an ‘Overweight’ rating on American Tower Corporation (NYSE:AMT) as well as a $305 price target after the analyst met with CFO Rod Smith. Cusick was ‘encouraged’ by trends in Latin America as well as Africa and the analyst also had ‘incrementally positive views’ on the company’s U.S., Europe, and Asia-Pacific business.
52 hedge funds in our database were long American Tower Corporation (NYSE:AMT) at the end of Q2 with Akre Capital Management among the leaders.
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 65
2021 Revenue: $79.024 billion
Intel Corporation (NASDAQ:INTC) is a leading semiconductor producer that sells server processors, memory & storage, security features, network connectivity, and workload optimized solutions to data centers.
Due to various headwinds, Intel had a difficult quarter for Q2 2022, and the company’s Datacenter and AI Group sales fell 16% year over year to $4.6 billion.
Given the headwinds, broader market decline, and competition, shares of Intel Corporation (NASDAQ:INTC) have fallen by almost 50% year to date.
65 hedge funds in our database owned shares of Intel Corporation (NASDAQ:INTC) at the end of the second quarter with Generation Investment Management with the largest position at almost 14.8 million shares.
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 87
2021 Revenue: $16.434 billion
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor company that sells CPUs and GPUs for data centers across the world and ranks among our list of Top 12 Data Center Companies in the USA.
Because it has used Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as a manufacturer, Advanced Micro Devices, Inc. (NASDAQ:AMD) has gained market share in the last ten years as Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has moved ahead of Intel in terms of manufacturing the world’s smallest chips.
Advanced Micro Devices, Inc. (NASDAQ:AMD) has also gained substantial new business in terms of providing efficient chips to data centers.
Given the weaker market, however, shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) are down 56% year to date. In the second quarter, 87 hedge funds in our database owned shares with Fisher Asset Management among the top 5.
6. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 153
2021 Revenue: $257.637 billion
Although it is much better known for its search or YouTube business which account for a much bigger part of the company’s annual revenue, Alphabet Inc. (NASDAQ:GOOG) also has an extensive data center business given its cloud operations. With Google Cloud, businesses can use computing, storage, database, data analytics, AI and machine learning, and many other services on demand.
Alphabet Inc. (NASDAQ:GOOG)’s cloud business is growing pretty quickly. For the quarter ended June 30, 2022, Google Cloud accounted for $6.276 billion of sales, up from $4.628 billion in the same quarter of the prior year. If it continues to grow, Alphabet Inc. (NASDAQ:GOOG)’s business could eventually become profitable.
In the second quarter, 153 hedge funds in our database owned shares in Alphabet Inc. (NASDAQ:GOOG) with TCI Fund Management with a position of almost 2.5 million shares.
5. Oracle Corporation (NASDAQ:ORCL)
Number of Hedge Fund Holders: 69
2021 Revenue: $40.479 billion
While it is known more for its databases and enterprise software services, Oracle Corporation (NASDAQ:ORCL) also has its own cloud business, and with it, the company has globally distributed data enters that provide secure and high performance environments. According to the company, Oracle Corporation (NASDAQ:ORCL)’s global cloud data center infrastructure includes data centers in 22 countries and serves customers from 40 different regions.
Oracle Corporation (NASDAQ:ORCL)’s data center business could also benefit from TikTok’s growth as the company has decided to use Oracle Corporation (NASDAQ:ORCL) as a cloud infrastructure partner to handle traffic for US user data.
69 hedge funds in our database owned shares of Oracle Corporation (NASDAQ:ORCL) at the end of the second quarter with First Eagle Investment Management being the top holder with a long position of over 25.9 million shares.
4. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
2021 Revenue: $57.35 billion
International Business Machines Corporation (NYSE:IBM) is a leading tech company that also has a cloud business. With IBM cloud, the company has more than 46 data centers across 9 regions and 27 availability zones.
Like many other tech companies this year, International Business Machines Corporation (NYSE:IBM) has faced headwinds.
On September 28, David Vogt of UBS cut his price target on International Business Machines Corporation (NYSE:IBM) to $112 from $118 and set a ‘Sell’ rating on shares. Vogt thinks International Business Machines Corporation (NYSE:IBM) faces incremental foreign exchange headwinds relative to mid July and International Business Machines Corporation (NYSE:IBM)’s consulting revenue growth is likely to slow faster thane expectations.
40 hedge funds in our database owned shares of International Business Machines Corporation (NYSE:IBM) at the end of Q2 2022. Arrowstreet Capital was among the top holders with a long position of more than 2.6 million shares.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
2021 Revenue: $16.675 billion
NVIDIA Corporation (NASDAQ:NVDA) is a leading semiconductor producer that also sells GPUs to data centers. Given that GPUs are in some ways superior to CPUs for certain applications used in data centers, NVIDIA Corporation (NASDAQ:NVDA) is a company that could benefit from the growth in data centers.
Given the large rally in NVIDIA Corporation (NASDAQ:NVDA)’s stock over the last ten years, however, a lot of the growth may have already been priced in but there could still be long term upside if the growth continues. On September 21, Ambrish Srivastava of BMO Capital cut his price target to $210 from $230 and kept an ‘Outperform’ rating. 84 hedge funds in our database owned shares in NVIDIA Corporation (NASDAQ:NVDA) at the end of the second quarter with Fisher Asset Management owning almost 7.6 million shares.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
2021 Revenue: $168.088 billion
Although it is better known for producing Windows, Microsoft Corporation (NASDAQ:MSFT) also has a huge cloud business in Azure which includes over 200 physical data centers around the world. Due to its competitiveness, Microsoft Corporation (NASDAQ:MSFT) is the second largest IaaS cloud services provider in the world. If it continues to grow, Microsoft Corporation (NASDAQ:MSFT) could have a very profitable data center business in the future given the economies of scale.
On September 29, Andrew Marok of Raymond James set an ‘Outperform’ rating and $300 price target on the stock, citing among other things, the company’s strong position in the public cloud.
258 hedge funds in our database owned shares of Microsoft Corporation (NASDAQ:MSFT) at the end of the second quarter with TCI Fund Management among the top holders with more than 19.6 million shares.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
2021 Revenue: $469.822 billion
In addition to its huge e-commerce business, Amazon.com, Inc. (NASDAQ:AMZN) also has the leading cloud business in the world in Amazon Web Services, which has many data centers worldwide. In terms of its financials, Amazon.com, Inc. (NASDAQ:AMZN)’s cloud business is growing quickly and profitable. For Q2 2022, Amazon Web Services grew 33% year over year to $19.74 billion in sales and generated $5.72 billion in operating income.
In the long term, Amazon.com, Inc. (NASDAQ:AMZN)’s earnings could increase if its cloud business continues its fast growth.
On September 29, Ronald Josey of Citi reitered a ‘Buy’ rating and a $185 price target on the stock, citing among other things steady Amazon Web Services growth.
252 hedge funds in our database owned shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q2 2022. Fisher Asset Management owned 48.6 million shares in the second quarter.
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Disclosure: None. Top 12 Data Center Companies in the USA is originally published on Insider Monkey.
