BlackJack3D
What are the most attractive data center stocks right now?
Seeking Alpha analysts Geneva Investor, Joseph Parrish and PropNotes weigh in.
Geneva Investor: I see Super Micro Computer (NASDAQ:SMCI) as a good data center bet. Its valuation is reasonable at 1.3X Sales and ~22 P/E. Despite fully recovering from accounting issues a year ago, the stock remains well below its all-time high.
Joseph Parrish: With all the data center stocks I’ve seen, only one seems like a dead ringer in terms of both fundamental opportunity and undervaluation: DigitalBridge (NYSE:DBRG). With a balance between investments in data centers and more traditional infrastructure like fiber, they are poised to support an AI economy. Given lumpy earnings in their infancy that will improve with scale, I think the market is overlooking this one.
Applied Digital (NASDAQ:APLD) is close and worth a second look if its price comes down more, but both businesses take advantage of owning and monetizing data center assets directly, which is why I like them.
PropNotes: Data center (and data center-related) stocks have been on the run recently, as the AI boom has entered its third year. With major cloud titans poised to spend half a trillion in 2025 on Capex alone, there’s a tremendous amount of money sloshing around in the ecosystem. While a rising tide lifts all boats, we think a few players are poised to benefit the most.
One is Credo (NASDAQ:CRDO), a relatively small manufacturer of electrical cables and optical DSP chips. While expensive on trailing metrics, we think top-line growth will remain elevated, making a purchase at today’s price appear reasonable. With huge net margins, this component manufacturer is positioned to return tremendous capital to shareholders in the coming years.
Similarly, Nebius (NASDAQ:NBIS) is a great option for those looking for a pure-play ‘GPU cloud’ opportunity. With rapidly growing ARR, strong projected unit economics, and an experienced management team, we think paying (potentially) 19x 2026 EBITDA appears highly attractive.