The Caisse de dépôt et placement du Québec announced on June 18 that it was selling its stake in eStruxture Data Centers Inc. as part of the Canadian company’s 1.8 billion Canadian dollars ($1.32 billion) recapitalization. The sale suggests there is still plenty of interest in the data center industry and the best data center stocks, specifically.
“As major technology players expand cloud regions across Canada, and AI and Machine Learning become integral to business operations, eStruxture is uniquely positioned to meet these needs with scalable and sustainable data center solutions,” stated the June 19 press release.
According to the press release, eStruxture owns 15 state-of-the-art data center facilities across Canada and has almost 1,000 customers in Canada and elsewhere.
Data centers remain an important part of the move to AI on both sides of the border. These three data center stocks are worth considering for long-term gains in July and beyond.
Digital Realty Trust (DLR)
While eStruxture might be a big player in Canada, Digital Realty Trust (NYSE:DLR) is one of the largest global owners of data centers, with over 300 located in more than 50 cities and serving approximately 5,000 customers worldwide.
It is the seventh-largest publicly traded real estate investment trust (REIT) in the U.S. It has a $49 billion market capitalization and $67 billion enterprise value. It’s been a part of the S&P 500 since 2016.
The REIT’s June presentation says that 49% of its global revenue is generated in non-U.S. dollars. This provides a natural hedge for and against the Greenback.
In late June, JPMorgan Securities analysts upgraded DLR stock to Overweight from Neutral. At the same time, they increased their target by $25 to $175, 16% higher than where it’s currently trading. The JPMorgan analysts see Digital Realty benefitting from AI and the cloud.
DLR pays a quarterly dividend of $1.22 a share, and the annual rate of $4.88 yields a healthy 3.2%. You’ll get paid to watch its revenue grow as the world transitions to AI.
Fastly (FSLY)
Fastly (NYSE:FSLY) provides a programmable edge cloud platform that helps its customers provide a secure online experience for their users through websites and apps.
Fastly’s stock has lost 58% of its value in 2024. It now trades in single digits after hitting $25 in February.
The problem for Fastley is slowing sales.
The company reported Q1 2024 results on May 1 after the markets closed. Short of analyst estimates, its first-quarter sales grew by nearly 14% to $133.52. On a non-GAAP basis, it lost five cents a share in the quarter, better than the six-cent loss from analysts.
That’s not what knocked 32% off its share price on May 2.
It was a combination of its RPOs (remaining performance obligations) declining by 4% from Q1 2023 to $227 million and a downward revision in its 2024 revenue to $560 million from $585 million.
CEO Todd Nightingale touched on Fastly’s customer base in the Q1 2024 conference call. In the quarter, Fastly grew its enterprise customer count by 37 to 577, with 18 customers spending more than $100,000 annually. It finished the quarter with a total customer count of 3,290.
Fastly stock hasn’t traded this low since going public five years ago. Aggressive investors ought to consider this down but not out data center stock.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) was in a decent-sized correction, falling 16% from its June 20 52-week high of $140.76 to its June 24 low of $118.04. While some losses have been regained, this data center stock is trying to find its footing.
The correction can’t be a surprise. At its 52-week high, its share price was up 184% year-to-date, making it the second-best performer in the S&P 500 behind only Super Micro Computer (NASDAQ:SMCI), up 197% in 2024.
The company reported Q1 2025 results in May, including a 427% year-over-year increase in data center revenue to $22.6 billion. The unit accounted for #87% of total sales in the quarter.
“The next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence,” said Jensen Huang, Nvidia co-founder and CEO.
Huang said in February that in the next 4-5 years, there will be $2 trillion in data centers powering the global AI movement, double what it is today. Nvidia intends to have them use its AI accelerators — MI300, MI325 and Blackwell platform — to power the software needed for accelerated computing.
It’s in an excellent position to benefit from AI and data centers for years to come.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
