Best data centre stocks to watch in 2020
Data centres store information and house IT infrastructure – including computer servers, software and hardware. Here, we’ll run you through some top data centre stocks to watch, from some of the largest companies in the world.
What is a data centre company?
A data centre company provides infrastructure for information storage. Large data centres can be housed in entire factories, with rows upon rows of machines that store data and other information for companies without the capabilities to store it themselves.
Data centre companies can generally fall into two categories:
- Data centre companies that run and house the software and physical hardware for storing data
- Data centre real estate investment trusts (REITs) that invest in data centre companies, or which sometimes own data centres outright
To get broad exposure to data centres, some people will choose to trade or invest in data centre REITs. That’s because REITs will give exposure to more than one data centre at once, with some REITs holding interests in hundreds of data centres at a time.
Data centre REITs can also operate their own data centres – depending on the nature of the company.
Top 5 data centre stocks to watch
Here, we’ll run you through some of the biggest data centre companies in the world in terms of storage capacity.
Digital Realty is a real estate investment trust (REIT) that invests in data centres, with interests in over 200 data centre facilities. The company is listed on the New York Stock Exchange (NYSE) under the DLR ticker, and is a component of the S&P 500 index.
Digital Realty Trust has acquired other high-level data centre companies in the last few years, including DuPont Fabros Technology – which was another REIT that invested in data centre companies.
CyrusOne is a REIT that invests in data centres. It’s the third largest provider of data centres in the US, and it serves 185 of the Fortune 1000 companies worldwide.1 CyrusOne is listed on the NASDAQ exchange under the CONE ticker. The company is also a constituent of the S&P 400.
CyrusOne has a range of available data centres, including hyper speed, built-to-suit and colocation solutions. The company has clients in a range of sectors, including financial services, retail, healthcare, government and others.
Amazon Web Services
Amazon Web Services (AWS) is a subsidiary of Amazon – the ecommerce giant. It provides data centre solutions for a range of clients, including individuals, companies and governments. The company’s largest cluster of data centres is located in Northern Virginia.
As a subsidiary of Amazon, you’ll need to trade AMZN shares to get exposure to AWS. AMZN shares are listed on the NASDAQ exchange, and the company is a component of the NASDAQ 100, S&P 100 and the S&P 500.
Amazon Web Services boasts some high-profile clients, including:
Equinix operates the world’s largest network of interconnected data centres,2 with over 9700 companies and 1800 networks in EMEA, APAC and the Americas. The company is listed on the NASDAQ exchange under the EQIX ticker. It is also a component of the S&P 500.
Equinix converted to a REIT in 2015, and the company has committed more than $20 billion to the development of its data centre platform since its founding.
China Telecom Corporation Limited
China Telecom Corporation Limited is a subsidiary of the China Telecommunications Corporation, which is listed on the NYSE under the CHA ticker. The company – China Telecommunications Corporation – is majority owned by the Chinese government, and it boasts ‘the world’s largest broadband internet network and a leading-edge mobile communications network’.3
Aside from being majority-owned by the China Telecommunications Corporation, there are also some other high profile investors in the China Telecom Corporation Limited. BlackRock, JPMorgan Chase and the Bank of New York Mellon all have minority holdings in the company.
How to trade and invest in data centre companies
There are two ways that you can get exposure to data centre companies: trading or investing. Let’s go through both of these in turn.
Trading means that you’ll be speculating on the price of data centre company stocks rising or falling with financial derivatives like spread bets and CFDs. To speculate on the price rising you’d go long, and to speculate on the price falling you’d go short.
When you’re trading, you’ll be able to open a position with leverage – which’ll grant you full market exposure for an initial deposit. But, while leverage can increase your profits, it can also increase your losses. You also won’t own the shares directly when trading, but this does make it possible for you to go short.
Investing in data centre companies means you’ll take direct ownership of the shares. This’ll make you a shareholder, and you might be eligible to receive dividend payments and voting rights if the company grants them.
Since you’ll own the shares outright, you’ll need the price to rise in order to make a profit and any increase above the initial price that you paid for the shares represents your gain – if you choose to sell your shares.
Top data centre stocks summed up
- Data centre companies house computer systems and other components that are crucial for another business to operate
- Many data centre companies are also REITs – which enable traders or investors to get broad exposure to many data centres at once
- Trading data centre company shares means that you’re taking a speculative position on the value of the shares rising or falling
- Investing in data centre shares means that you’re taking direct ownership of the shares and you’ll profit from any increase in their price
- Create an account today to get started trading or investing in data centre companies
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