GDS Holdings is Positioned as a Datacenter Play with High Growth Potential

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Written By Dean McHugh

GDS Holdings (NASDAQ: GDS) stands as a leading high-performance data developer and provider headquartered in China. Leveraging its unique cloud computing platform, GDS has consistently outperformed, catering to the needs of top-tier companies in data services.

Company Background

Credits: DepositPhotos

Founded in 2001, GDS Holdings started as an IT service provider before transitioning into the data center business with its first self-developed data service center in 2010.

The company is now a leading developer and operator of high-performance data centers in China and Southeast Asia. GDS is renowned for its data centers’ large net floor area, high power capacity, density, efficiency, and multiple redundancies across all critical systems.

The company’s primary clients include hyperscale cloud providers, large internet companies, financial institutions, telecommunication centers, IT service providers, and multinational corporations.

GDS’s growth trajectory has been impressive, particularly in the early 2010s. The company expanded its customer base and opened new centers in key Chinese cities, eventually listing on Nasdaq in 2016 and HKEX in 2020.

GDS has since expanded its data centers abroad, notably in Malaysia, maintaining a robust market presence.

Qualitative Analysis

To better understand GDS’s position within the industry, we conducted a competitive analysis:

Threat of New Entrants: The IT services industry has high barriers to entry due to the significant investment required. GDS benefits from a stable customer base of 864 leading companies, making it difficult for new entrants to compete. GDS’s strong brand reputation and trust among clients further protect it from new competitors.

Bargaining Power of Buyers: Customers in this industry have considerable bargaining power due to numerous alternatives. However, GDS mitigates this with unique services like CloudMIX, which offers robust management interfaces for hybrid cloud computing environments.

Bargaining Power of Suppliers: The bargaining power of suppliers is moderate. While specialized equipment suppliers hold significant power, GDS’s strong market position helps negotiate favorable terms.

Threat of Substitutes: There is pressure from alternative IT solutions, but the trend towards outsourcing data center needs to specialized providers like GDS reduces this threat. GDS’s certifications and strategic expansion into niche markets further mitigate substitution risks.

Competition Among Existing Competitors: The global IT services industry is highly competitive. GDS’s focus on high-performance data centers and specialized services helps maintain a competitive edge against rivals like Inspur Group, Core Scientific, and Taiji Computers.

Main Driving Points

Strong Demand for Overseas Data Centers: GDS continues to expand its data centers in China and abroad, increasing private capital raised for international data centers to $750M. Stable high-end chip supply will boost domestic demand, and expansion into North Asia and Europe looks promising.

Promotion of Digital Development in China: China’s plan to promote digital development aligns with GDS’s strategic growth. The construction of large-scale data centers in key regions will strengthen GDS’s market presence, supported by national policies encouraging digital infrastructure.


We used a Discounted Cash Flow (DCF) model, considering a historical period from 2019 to 2023 and forecasting ten years from 2024 to 2033. We started with an initial growth rate of 11.05% for 2024 and assumed a terminal growth rate of 2.5%.

Using a beta of 0.48 and a WACC of 6.23%, we arrived at a target price of $11.78, indicating a 44.74% upside from the current price.

Sensitivity Analysis: Our sensitivity analysis showed that the target price exceeds the current trading price for multiple discount rates and terminal growth rates. This analysis supports our valuation, indicating GDS is undervalued with significant growth potential.

Discussion of Risks

Unstable Performance: GDS has experienced high revenue growth but also instability. The company’s high leverage due to capital-intensive operations increases its vulnerability to interest rate fluctuations. However, our conservative growth rate and WACC in the valuation mitigate this risk.

Market Slowdown and Competition: China’s slower economic growth poses a risk, but GDS’s strong market position and government policies promoting digital development provide resilience. The competitive IT services industry requires GDS to maintain its technological edge and industry positioning.


Credits: DepositPhotos

GDS Holdings operates in a dynamic industry with significant growth opportunities. Despite challenges, the company’s strengths and growth prospects make it an interesting investment consideration. Investors should remain vigilant, but GDS represents a strong, growing company poised to capture market potential.



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