Data center shares extend DeepSeek-triggered losses; Jefferies remains bullish

Capcom

28/01/2025 17:00

** Shares of data center firms falling on Tues, adding to sharp
losses on Mon after Chinese startup DeepSeek triggered steep
selloff in artificial intelligence-linked names
** Roll out of DeepSeek's free model raised doubts for continued
strong demand for data centers
    ** Digital Realty's  DLR.N  shares down 5% on Tues. Stock
shed nearly 9% loss in previous session, hitting over over 3-mth
low
    ** Equinix  EQIX.O  off 1%, Iron Mountain  IRM.N  down ~6%
and Core Scientific  CORZ.O  down 7% on Tues. On Mon, EQIX lost
~4%, IRM fell >6%, while CORZ tumbled ~29%
    ** Vertiv Holdings  VRT.N , which designs and builds data
center infrastructure, last down 2%, after 30% plunge on Mon
    ** In research note late Mon, Jefferies said it doesn't
"subscribe to the knee-jerk reaction" that DeepSeek's model will
significantly slow data center investment, adding that sell off
on Mon creates a buying opportunity for DLR, EQIX and CORZ
    ** Jefferies said it "would be surprised to see hyperscalers
slow their capex plans as the AI space just got even more
competitive, and the risk of falling behind is too high"
** Low cost of DeepSeek's R1 model will drive prices down for
all models, Jefferies said, which will accelerate enterprise
adoption, driving colocation data center demand
    ** In 2024, DLR rose 32%, EQIX gained 17%, IRM surged 50%,
while VRT rocketed ~137%
** Shares of CORZ have more than tripled since co emerged from
bankruptcy last Jan

(Lance Tupper is a Reuters market analyst. The views expressed
are his own)
((lance.tupper@tr.com 1-646-279-6380))