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Artificial intelligence (AI) is driving a seismic shift across industries worldwide. While Nvidia’s (NVDA) advancements in AI capture headlines, the next wave of opportunity might lie with the unsung heroes behind the scenes. As the world shifts from research to real-world applications, the demand for scalable AI infrastructure is surging.
The explosive growth of AI is driving an increased need for hyperscale data centers, with the market size expected to soar from $45 billion in 2024 to $262 billion by 2032 at a compound annual growth rate of 24.7%.
These data centers, along with other key infrastructure providers, are becoming the modern-day “picks and shovels” of the AI gold rush. As AI capabilities evolve, these infrastructure companies are uniquely positioned to capitalize on the rapid expansion of this sector. Let's dive into five standout stocks in this exciting space to scoop up now.
Stock #1: Hewlett Packard Enterprise
Founded in 1939, Texas-based information technology (IT) company Hewlett Packard Enterprise Company (HPE) provides solutions that allow customers to capture, analyze, and act upon data seamlessly worldwide. It offers general-purpose servers, storage products, networking solutions, and professional services, catering to commercial and large enterprise clients. Its market cap currently stands at $26.6 billion.
Fueled by excitement around its role in AI servers, HPE stock has been on a remarkable run this year. Over the past 52 weeks, shares of Hewlett Packard Enterprise have soared 19.3%, with an impressive 32.8% surge in just the last six months.
Hewlett Packard Enterprise is riding the AI wave thanks to its cutting-edge data center solutions. With its AI Ops optimizing power and cooling and its cloud portfolio empowering scalable AI model training, HPE looks poised to benefit from the soaring demand for robust AI infrastructure.
HPE has a consensus “Hold” rating overall. Of the 14 analysts in coverage, two recommend a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining 11 analysts are playing it safe with a “Hold” rating.
While the stock currently trades roughly flat with the average analyst price target of $20.25, the Street-high target price of $24 implies a 16.6% upside potential.
Stock #2: Equinix
Real estate investment trust (REIT) Equinix, Inc. (EQIX) provides colocation space, interconnection services, and cloud computing solutions. With over 260 interconnected data centers spanning 33 countries, it connects networks and cloud providers, offering top-tier colocation and cloud solutions. With a market cap of $74.6 billion, Equinix is a go-to hub for digital connectivity worldwide.
The REIT stock has underperformed over the past year, dipping 1% over the past 52 weeks. EQIX yields over 2% annually.
Equinix is making waves in the AI scene by weaving a global network of data centers into a powerhouse for AI development. In 2024, it’s supercharging its AI-focused infrastructure, teaming up with Nvidia, and crafting bespoke solutions for enterprises to build their own AI innovations. As demand for cutting-edge AI soars, Equinix is set to become a critical hub for data-hungry algorithms.
EQIX stock has a consensus “Strong Buy” rating overall. Out of the 26 analysts offering recommendations for the stock, 19 suggest a “Strong Buy,” one advises a “Moderate Buy,” and the remaining six analysts recommend a “Hold” rating. The mean price target is $899.91, representing an upside potential of 12.6% from current levels.
Stock #3: Digital Realty Trust
San Francisco-based Digital Realty Trust, Inc. (DLR) is a powerhouse in the data center REIT world. With a market cap of $48.47 billion, it is a key player in owning, developing, and managing data centers globally, offering vital IT infrastructure and services to businesses in need of robust digital solutions.
Shares of Digital Realty have rallied 29.5% over the past 52 weeks and 14.5% over the past three months. The REIT yields over 3% annually.
Digital Realty is flexing its AI muscles to supercharge data centers with its in-house AI platform, Apollo, which optimizes energy use, detects anomalies, and tweaks performance for peak efficiency.
As demand for scalable AI infrastructure surges, Digital Realty is well-positioned to lead in providing robust, adaptable data center solutions crucial for the next generation of AI advancements. Owning and operating over 300 data centers across six continents, the company is set to be a key player in supporting the expanding AI ecosystem.
Digital Realty stock has a consensus “Moderate Buy” rating overall. Out of the 23 analysts covering the stock, 14 suggest a “Strong Buy,” one advises a “Moderate Buy” rating, seven recommends a “Hold,” and the remaining one gives a “Strong Sell.”
While DLR currently trades at a premium to its mean price target of $154.54, the Street-high price of $185 indicates a potential upside of 18.9% from the current price levels.
Stock #4: American Tower
American Tower Corporation (AMT), with a market cap of $98.1 billion, is a heavyweight in global REITs. As a premier owner, operator, and developer of multitenant communications real estate, AMT boasts a portfolio of over 224,000 sites and a highly interconnected network of U.S. data center facilities.
AMT stock has rallied 13.2% over the past 52 weeks, and over the past three months alone, it surged an impressive 21.5%. The REIT offers a 3.1% yield at current levels.
American Tower isn't just about cell towers; it’s a hub for all things digital. It provides fiber optics, the high-speed backbone that AI thrives on, supporting data centers with its nationwide network of lightning-fast connections. Data centers lean on American Tower to keep their nationwide network of ultra-fast connections running smoothly.
American Tower’s CoreSite division is primed for the AI boom. With top-tier data centers across North America, CoreSite caters to enterprises and cloud giants needing high-speed, scalable solutions.
On Wall Street, AMT stock has a consensus "Strong Buy" rating. Out of 20 analysts in coverage, 15 recommend a "Strong Buy," one gives a "Moderate Buy," and four advise a "Hold" rating. The mean price target is $226.89, suggesting a potential upside of 8.4% from current levels.
Stock #5: Nippon Telegraph and Telephone
With a market cap of $86 billion, Tokyo-headquartered Nippon Telegraph and Telephone Corporation (NTTYY), since its launch in 1952, has been a pioneer in telecom, transforming global communications. Operating through various segments like Integrated ICT, Regional Communications, and Global Solutions, NTT excels in mobile, international, and intra-prefectural communications while also delving into real estate, energy, and innovative tech solutions.
Shares of Nippon Telegraph and Telephone have dipped 16.3% on a YTD basis, but rallied 10.8% over the past month.
The telecom giant is integrating AI across its operations, optimizing networks and enhancing customer service. By developing AI chips and exploring quantum computing, NTT aims to dominate the digital landscape. Its AI, like Tsuzumi, excels in language processing and visual comprehension, boosting productivity by transforming complex documents into easily extractable information.
Plus, a unit of NTT operates over 160 data centers in 20 countries, delivering cutting-edge digital infrastructure and advanced data-center solutions and services to support businesses globally with advanced digital infrastructure.
Analysts have a consensus rating of “Moderate Buy” on NTTYY stock, with a mean target price of $36.10, which indicates an upside potential of about 41.5% from current levels. Out of two analysts covering the stock, one advises a “Strong Buy” rating, while the other one recommends a “Hold.”
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
