This Data Centre Stock Could Go Parabolic in the Age of AI

This data centre stock is already surging thanks to cryptocurrency, but more is likely thanks to its investment in data centres.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published June 6, 2024 9:15 pm EDT

Canadian investors paying even slight attention to the growth in artificial intelligence (AI) have likely already seen the strength coming out of Nvidia. Yet it hasn’t only been the demand for its graphic processing units (GPU) funding the company’s future.

No, it’s also been data centres. Nvidia stock saw major growth in its data centre revenue during the last quarter, and that’s why some investors might be seeking out other data centre stocks as well.

This is exactly what we’re going to do today by going over why Hut 8 (TSX: HUT) could be the next stock to surge.

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies — Source: Getty Images

Beyond crypto

Hut 8 stock was back in investors’ interest during the company’s move to cryptocurrency. The miner seeks out Bitcoin but has since expanded its operations to purchase data centres. This could be a major win for the company.

AI applications require significant computational power for training and inference. This drives demand for data centres equipped with high-performance computing (HPC) capabilities. AI generates and processes vast amounts of data, necessitating extensive storage solutions, which data centres provide.

Hut 8, traditionally known for cryptocurrency mining, is diversifying its business by investing in data centres. This diversification can mitigate risks associated with the volatility of cryptocurrency markets and provide a more stable revenue stream.

Current excitement

The current excitement and investment in AI technologies can lead to increased investor interest in companies positioned to benefit from this trend. Companies with a clear AI strategy often see positive market reactions. As Hut 8 demonstrates success in its data centre ventures, it can positively influence investor confidence and stock performance.

Yet the company already has a strong advantage. Hut 8’s existing infrastructure, expertise in running large-scale data operations, and experience with energy-efficient mining operations provide a solid foundation for expanding into the data centre market.

What’s more, Hut 8’s data centres in strategic locations with access to low-cost energy can provide a competitive edge in terms of operational costs, making their services more attractive.

What to watch

Now, the company is already in a good position, but even more could be on the way. Collaborations with tech giants and AI-focused companies can enhance Hut 8’s capabilities and reputation in the data centre market, attracting more clients and investments. Partnering with other firms to develop advanced data centre solutions can accelerate growth and technological advancements.

Plus, increasing government support for AI and digital infrastructure projects can create favourable conditions for data centre investments. The global data centre market is expected to grow significantly, driven by the rise of cloud computing, Internet of Things, and AI. Companies that are early adopters and investors in this space stand to benefit from this growth.

Bottom line

Hut 8 stock has gone beyond crypto and is now seeing major growth thanks to its data centres. Hut 8’s strategic investments in data centres, aimed at leveraging the booming AI industry, position it to capitalize on the increasing demand for computational power and data storage. This diversification not only enhances its growth prospects but also makes it a more attractive investment, potentially leading to a surge in its share price on the TSX.