3 AI data center stocks with room to roar

Over the past year, some of the top AI data center stocks have been about as hot as the GPU makers themselves. Growing demand for AI computing is driving increased demand for AI chips, which means more AI-ready data centers will need to be built.

Indeed, many investors have recognized that data center stocks are a more “downstream” way to take advantage of the AI ​​boom.

This is why data center companies like Super microcomputer (NASDAQ:SMCI) may have appeared out of nowhere over the last year and a half. The expected growth in the data center sector has been meteoric, and it’s really hard to say when the tides will turn until the GPU makers themselves show some form of weakness.

In this article, we’ll look at three data center stocks that have shown volatility but may be far from recovery.

Super microcomputer (SMCI)

First, we have the big Super Micro Computer, which has started to look “in great shape” after the tough sell-off it suffered in March and April. After doubling several times over the past two years (shares are up more than 1,800% during that time), such a double-digit percentage drop is surely surprising to SMCI stock laggards.

Overall, however, this pullback could be more of an opportunity than a “come off the cliff” moment, especially as some investors are selling out of fear of sheer volatility and a potential downside scenario if the demand for AI was reduced. suddenly to hit a wall.

Unless you think the AI ​​boom is well past mid-cycle, the stock chart itself may be the biggest source of anxiety, because the valuation doesn’t seem so far-fetched at these levels. With the potential for AI demand to continue into the second half, SMCI stock may still have what it takes to recover from a multi-month period of painful price action.

Looking ahead, expect Super Micro to double down on what differentiates itself from the pack. Whether it’s liquid cooling technology to draw heat away from hot GPUs or Super Micro’s “modular” architecture for server design, the data center company appears to have a pretty wide moat.

Vertiv (VRT)

Vertiv (NYSE:VRT) is another wildly successful digital infrastructure game, just like Super Micro.

Year to date, VRT stock hasn’t been as hot as SMCI’s, up just over 100% compared to SMCI stock’s nearly 200% gain. Despite Super Micro’s lagging performance, Vertiv still looks considerably more expensive, at 38.1 times forward price-to-earnings (P/E), compared to Super Micro’s 22.9 times.

Vertiv should benefit from the same AI tailwinds as Super Micro Computer, but with a more diversified business that extends well beyond the data center, Vertiv may be better able to hold its own in the face of increased demand. of AI chips in mid-cycle that is cooling down. turned off, which will happen at some point.

Additionally, thermal management stands out as a competitive differentiator, according to Oppenheimer analysts. If you’re looking for diversification and AI data center upside, the premium on VRT stock may be worth paying.

Oracle (ORCL)

Oracle (NASDAQ:ORCL) is a major technology giant that has “demolished” it when it comes to data center expansion. The company is reportedly building 100 new data centers around the world while expanding the existing 66 centers. As a large, deep-pocketed $383 billion company, Oracle has the financial firepower to go deep into this AI boom.

More intriguingly, the company also has what it takes to power all of its data centers with 100% renewable energy sources by 2025. This is a very impressive renewable energy promise and one that could help set it apart from the crowd. Indeed, if there’s any company that could achieve this ambitious goal, it’s Oracle.

Combined with Oracle’s cloud and AI technology talents, Oracle could be the best way to play the long-term data center boom. With a forward P/E of 22.2 times, ORCL stock certainly appears to be one of the cheapest of the pack.

As of the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publishing Guidelines.