VNET Group: A Tech Gem on Hedge Funds' Buy Lists Amid AI Infrastructure Surge
15min read Amid the tech sector’s recent volatility, vnet group Inc. (NASDAQ: VNET) has quietly attracted significant institutional attention, with hedge funds and asset managers increasing their stakes at a time when the stock appears oversold. With its focus on AI-driven data center infrastructure in China, VNET is emerging as a contrarian play for investors betting on long-term growth in the digital economy. Let’s unpack why institutional buyers are doubling down—and whether this presents a compelling opportunity.
Hedge Funds Are Betting Big on VNET’s AI Play
The data paints a clear picture: hedge funds are piling into VNET. Infini Capital Management, a $79 million fund, now holds 42% of its portfolio in VNET, a staggering allocation that underscores its confidence in the company’s prospects. Over Q4 2024, Infini added 7 million shares, bringing its total stake to $33 million—a move made even more notable by the fund’s net reduction of other positions by $41 million during the same period.
Other institutional players followed suit. Geode Capital boosted its holdings by 238% in Q3 2024, while SG Americas Securities increased its stake by 535% in Q4. Collectively, institutional investors now own 72.8% of VNET’s shares, signaling a rare consensus in a sector where skepticism often dominates.
Financials: Navigating Short-Term Pain for Long-Term Gain
VNET’s recent financials reveal both challenges and opportunities. While the company reported a $47.3 million net loss in Q3 2024, its Q4 2024 net income jumped to 317.63 million yuan, driven by strong demand for its wholesale internet data center (IDC) projects. The company’s 297 MW of contracted IDC capacity, with 88.4% already committed and 490 MW reserved for future expansion, suggests it’s capturing a growing share of China’s AI infrastructure boom.
The debt-to-equity ratio of 1.46 raises some concerns, but VNET’s carrier-neutral data center model—which avoids reliance on any single telecom provider—provides a scalable, high-margin business. This model is critical in a sector projected to grow at a 9.29% CAGR through 2033, per industry estimates.
Analysts Split, But Bulls Have the Numbers
Analyst sentiment is divided. Citigroup recently upgraded its price target to $20.00 (from $16.10), citing VNET’s AI-driven services and hyperscaler partnerships. Nomura also issued a “Strong-Buy” rating in February 2025. However, StockNews.com downgraded the stock to “Sell” in March 2025, citing a $4.78 consensus price target (implying a 65.4% downside from peak prices in early 2025).
The disconnect here is telling. Bulls argue that VNET’s 72.57% average upside potential, as estimated by hedge funds, reflects its long-term moat in AI data centers—a space with high barriers to entry due to regulatory hurdles and capital intensity. Bears, meanwhile, focus on near-term risks like China’s regulatory crackdowns on tech and the company’s debt load.
Risks to Consider
Investors must weigh two critical risks. First, VNET’s debt-to-equity ratio could constrain its ability to fund future expansions if cash flows falter. Second, China’s regulatory environment remains unpredictable, as seen in the 11% stock drop on April 16, 2025, linked to sector-wide concerns.
Conclusion: A Contrarian Play with Catalysts Ahead
VNET Group isn’t a slam-dunk investment, but the data strongly supports its inclusion in portfolios betting on the AI infrastructure boom. With 26 hedge funds holding the stock, 88.4% of its contracted capacity already secured, and $20 price targets from major banks, the stock appears undervalued relative to its growth trajectory. While near-term volatility is inevitable, the 9.29% CAGR of the global data center market and VNET’s strategic position in China’s AI ecosystem make it a compelling contrarian pick.
For investors with a long-term horizon, VNET offers a chance to own a carrier-neutral data center leader at a price that doesn’t reflect its long-term potential. The question isn’t whether the AI revolution will continue—it’s whether you want to be positioned when it does.
