Explore the top 5 data center stocks of 2024, including Equinix and American Tower, benefiting from AI and 5G growth.
Sectors & Industries
September 20, 2024
The data center industry is booming, driven by the rise of cloud computing, artificial intelligence, and the increasing demand for digital infrastructure. If you're looking for long-term growth opportunities, data center stocks are a solid bet for 2024. Below are the top five data center stocks to consider, according to analysts.
Equinix is one of the largest global digital infrastructure companies, providing data center services across 72 metros worldwide. In 2024, the company is well-positioned to capitalize on the growing demand for AI-ready data centers, thanks to its xScale program, which focuses on building AI-centric data centers. Equinix’s consistent revenue growth, including an 8% increase in Q2 2024, and its focus on sustainability initiatives make it a top pick for investors seeking exposure to the data center market.
Digital Realty is a major player in the data center real estate sector, offering data center services to some of the largest tech companies globally. The company's AI platform, aimed at reducing energy consumption, has gained attention in 2024. With its solid financial performance and a share price target of $143, Digital Realty remains a favorite among analysts, particularly due to its strong positioning in the growing AI and cloud computing sectors.
Micron Technology specializes in producing high-end data storage semiconductors, which are crucial for data centers. The firm’s consistent focus on data storage solutions, combined with an expected 1% upside in share price, makes it an attractive investment for those looking to benefit from the growth of data centers. Micron is also well-supported by hedge funds, including Citadel Investment Group, which holds a significant stake.
American Tower Corporation is a leading real estate investment trust (REIT) that provides both telecommunications and data center services. With a 16% upside potential and an average analyst price target of $227.56, American Tower is set to benefit from the growing demand for data center infrastructure, driven by 5G and AI technologies.
SBA Communications focuses on providing wireless infrastructure solutions, including data centers. Despite some challenges in beating analyst earnings estimates, the firm’s strong growth potential, driven by the expansion of 5G networks and cloud services, makes it a solid option for 2024. Analysts have set a 24% upside potential for the stock, with a price target of $265.
Data center stocks are a promising investment category for 2024, as the demand for cloud computing, AI, and digital infrastructure continues to surge. Whether you're looking at REITs like Equinix and Digital Realty or semiconductor giants like Micron Technology, these companies are at the forefront of the digital revolution. Consider these top five data center stocks to add to your portfolio for potential growth this year.
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If you’re looking for an easy, direct and high-liquidity way to invest in data centers, several publicly traded real estate investment trusts fit the bill.
The Global X Data Center and Digital Infrastructure ETF (DTCR) is the only ETF that focuses directly on the data center industry. Its holdings are primarily in stocks, with shares of data center operators like Equinix and Digital Realty ranking high on the list. The ETF also invests substantially in companies that operate wireless infrastructure.
iShares IDGT
The iShares US Digital Infrastructure and Real Estate ETF (IDGT) isn’t a data center ETF per se, but it comes very close. It invests in many of the same data center and wireless infrastructure companies as DTCR, but it also includes holdings in networking companies like Cisco and Fastly.
iShares IDAT
iShares’ Future Cloud 5G and Tech ETF doesn’t currently own shares in any major data center operators. Instead, its holdings center on companies in the cloud, networking, and virtual infrastructure space.
This makes IDAT a strong contender if you believe that future growth in the data center industry won't center on the expansion of data centers themselves as much as on digital services and infrastructure running on top of those data centers.
Data centers are typically owned and operated either by big companies (such as cloud vendors, banks, or telcos) for their own purposes or by co-location companies. The latter lease out the space and typically provide network capacity and power, as well as the cooling equipment that keeps down server temperatures. Tenants bring their own IT equipment.
Data centers have attracted the interest of investors, often because of the steady, utility-like cash flows and risk-adjusted yields.
Northern Virginia is by far the largest data center market in terms of power. According to CBRE’s Global Data Center Trends 2023 report, Northern Virginia has over 2.1 GW of total capacity in wholesale colocation facilities alone. That’s almost one-fourth of the total capacity in the U.S.
According to Cushman and Wakefield, data center development in the U.S. increased almost 140 percent between 2018 and 2023, from 3.6 GW to at least 8.6 GW. Nearly three-fourths of that growth was concentrated in six key markets. Even with this level of development, many data center markets are at more than 90 percent capacity. According to Cushman and Wakefield, Northern Virginia has less than 2 percent vacancy.
Canada has the fifth largest number of data centers and is seeing 8.21 percent growth, according to Arizton. Mexico has the 11th largest number and is seeing 9.37 percent growth.
The primary data center markets in the United States are located in Northern Virginia, Phoenix, Dallas, Atlanta, Chicago, Northern California (Silicon Valley), Portland (including Hillsboro, Oregon), New York & New Jersey, Seattle (including Quincy, Washington), and Los Angeles.
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