Why Nvidia’s China Comeback Could Power Up This Data Center Stock: JPMorgan’s Bullish Take for Investors
The Resurgence of GDS Holdings: What Nvidia’s Return to China Means for Investors
In a move that’s sending ripples through the data center and AI infrastructure sectors, JPMorgan has just upgraded GDS Holdings to overweight from neutral, boosting the price target from $34 to $46—a solid 22% upside from recent closing prices. This bullish stance is anchored on Nvidia’s resumption of shipments of its coveted H20 general processing units (GPUs) to China, a development that many investors may have underestimated in its broader market impact.
Why does Nvidia’s shipment resumption matter so much? Back in April, Nvidia halted sales of these high-demand AI chips to China due to U.S. government licensing restrictions. Now, with licenses expected to be granted soon, Nvidia’s ability to supply these GPUs unlocks a critical growth lever for GDS Holdings, a leading China-based data center operator. JPMorgan’s analyst Gokul Hariharan points out that the renewed supply will “drive an upside case for the domestic data center business,” particularly as demand from Tier-1 cloud providers like Alibaba remains robust. Alibaba’s staggering 150 MW order in Q1 2025 for AI inference compute underscores the explosive growth potential in this sector.
What’s particularly noteworthy—and often overlooked—is the nuanced balance between AI training and inference compute demand in China. While some regions such as Ulanqab may face mild oversupply due to aggressive infrastructure buildouts, GDS’s strategic positioning limits its exposure to these oversupplied areas. This means GDS is well-placed to capitalize on the rising demand for AI inference workloads, which are expected to drive pricing power and revenue growth into next year.
On the international front, GDS’s subsidiary DayOne is expanding aggressively into new markets like Thailand and Europe. Despite some GPU export restrictions in countries like Malaysia, DayOne’s growth trajectory remains strong, fueled by demand from major Chinese social media clients and fresh market openings. This diversification strategy not only mitigates geopolitical risks but also positions GDS as a formidable global player in the AI data center space.
For investors and advisors, here’s what this means: The Nvidia-GDS dynamic is a prime example of how supply chain and regulatory shifts can create compelling investment opportunities in AI infrastructure. With 17 out of 18 analysts rating GDS as a strong buy or buy, the consensus price target hovers near $45, signaling widespread confidence in the company’s growth prospects.
Actionable Insight: Investors should consider increasing exposure to GDS Holdings as part of a broader AI and cloud infrastructure portfolio. However, it’s critical to monitor regulatory developments closely, especially U.S.-China trade relations and export controls, which could impact GPU supply dynamics. Additionally, advisors might want to look at complementary investments in cloud service providers and semiconductor firms benefiting from AI’s rapid expansion.
A recent trend worth watching is the shift toward AI inference compute, which is less resource-intensive than training but far more pervasive in real-world applications like recommendation engines and autonomous systems. This shift could lead to more stable, recurring revenue streams for data center operators like GDS, contrasting with the cyclical nature of training compute demand.
In summary, Nvidia’s renewed shipments to China are more than just a supply chain update—they represent a pivotal inflection point for GDS Holdings and the broader AI infrastructure market. For investors seeking to ride the AI wave, GDS offers a uniquely positioned opportunity with strong upside potential, diversified international growth, and a front-row seat to the AI revolution unfolding in China and beyond.
Sources:
– JPMorgan Equity Research
– LSEG Analyst Consensus Data
– Alibaba Q1 2025 Earnings Reports
– Industry analysis on AI compute demand trends (Extreme Investor Network proprietary insights)
Source: This data center stock will be a winner as Nvidia resumes China shipments, JPMorgan says
