Baron Funds, an investment management company, released its “Baron Emerging Markets Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 10.89% (Institutional Shares) in the third quarter compared to a 10.64% return for the MSCI Emerging Markets Index (the Benchmark) and a 11.48% return for the MSCI Emerging Markets IMI Growth Index (the Proxy Benchmark). YTD, the fund returned 31.79% compared to 27.53% and 28.19% for the indexes. The firm was satisfied with the quarterly results, particularly given the underperformance of Indian equities during that period, but it is still well ahead of both the Benchmark and the Proxy Benchmark on a year-to-date and one-year trailing basis. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its third-quarter 2025 investor letter, Baron Emerging Markets Fund highlighted stocks such as GDS Holdings Limited (NASDAQ:GDS). GDS Holdings Limited (NASDAQ:GDS) is a data center operator in the People’s Republic of China. The one-month return for GDS Holdings Limited (NASDAQ:GDS) was 12.39%, and its shares gained 72.84% over the last 52 weeks. On December 09, 2025, GDS Holdings Limited (NASDAQ:GDS) stock closed at $36.02 per share, with a market capitalization of $6.898 billion.
Baron Emerging Markets Fund stated the following regarding GDS Holdings Limited (NASDAQ:GDS) in its third quarter 2025 investor letter:
“During the quarter, we also added to our China value-added theme by reinitiating an investment in GDS Holdings Limited (NASDAQ:GDS), an operator of mission-critical data center facilities in China and internationally with core customers such as Alibaba, Tencent, Baidu, ByteDance and Kuaishou. In our view, China is in the early innings of scaling its AI ecosystem along with rising penetration of cloud computing, digital payments, and short-form video that should provide secular growth tailwinds for data center operators like GDS. The company’s core competitive advantages are under pinned by access to large-scale power in Tier-1 cities in China that can support latency sensitive applications, a long track record of development to meet customer time-sensitive deployments, and leading market share within the third-party carrier-neutral data center space. We have a long history with GDS since its IPO in 2017. We recently traveled to Asia to tour the company’s newly developed data center campus in Malaysia and interacted with GDS International’s (renamed “DayOne”) executive team. We also conducted extensive market due diligence by meeting with several global competitors based in Singapore. In our view, DayOne, which recently completed an impressive private capital raise, will continue to see its valuation rise given its attractive growth outlook. Ultimately, the value of this business should yield $15 to $20 per share to GDS over the next 12 to 18 months with a planned listing of the business over the next year. The contracted nature of cash flow growth is under-appreciated with cash flow ramping from approximately $200 million to $1 billion over the next two years based on definitive contracts. This implies we are investing in GDS’ mainland China business at only 11 to 12 times EBITDA, a steep discount to global peers, suggesting considerable upside. Furthermore, GDS recently listed a subset of its assets into a public REIT vehicle, which is now valued at more than 20 times cash flow.”
GDS Holdings Limited (NASDAQ:GDS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 53 hedge fund portfolios held GDS Holdings Limited (NASDAQ:GDS) at the end of the third quarter, up from 37 in the previous quarter. While we acknowledge the risk and potential of GDS Holdings Limited (NASDAQ: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 Holdings Limited (NASDAQ:GDS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered GDS Holdings Limited (NASDAQ:GDS) and shared the list of unstoppable stocks to buy and hold for the next 5 years. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
