3 Data Center Stocks Poised to Grow 10X as AI Demand Surges

Industry Overview - Artificial intelligence (AI) is rapidly expanding into various industries, with significant investments from major tech companies like Alphabet, Microsoft, Meta, and Apple, benefiting infrastructure companies [1] - The data center stocks sector is expected to see the highest growth among all capital goods markets, with a forecasted compound annual growth rate (CAGR) of 24% from 2024 to 2027 [1] Company Summaries GDS Holdings (GDS) - GDS Holdings, based in Hong Kong, develops and operates data centers in China and Southeast Asia, with a focus on expanding its international footprint [3] - The company reported a 5.4% year-over-year increase in total area committed and pre-committed by customers, and a 12.5% increase in area in service [3] - Despite a 9.1% increase in sales and growing customer commitments, GDS is not yet profitable but is heavily investing in new facilities [3] - GDS is considered undervalued, with an enterprise value of $8.09 billion compared to a market cap of $2.15 billion, leading to analyst optimism and a price target suggesting a 45% upside to $14.89 per share [4] Vertiv (VRT) - Vertiv provides critical digital infrastructure solutions, including power management and cooling systems essential for data centers [5] - The company reported a 114.1% year-over-year growth in EPS and a 12.6% revenue growth in its recent second quarter, with a 60% year-over-year increase in organic orders driven by AI deployments [5][6] - Analysts project an average price target of $105.37 per share for Vertiv, indicating a 55% potential upside from current levels [6] Silicon Motion (SIMO) - Silicon Motion manufactures solid-state memory drives, expecting sales growth of 25-30% this year, with a 15% sequential increase in quarterly revenue reported recently [7] - The company anticipates full-year revenue between $800 million and $830 million, representing a 25% to 30% year-over-year increase [7] - SIMO stock trades at a price-to-earnings (P/E) ratio of 26.6, below the sector average, with 11 out of 14 analysts recommending a buy, and an average price target of $93.89 per share suggesting a potential upside of 58% [8]