Nomura GDS Holdings (GDS.OQ): Ready for Domestic Expansion

Nomura reiterates a Buy rating on GDS Holdings (GDS.OQ) and has raised its target price from $41.50 to $54.50, implying approximately 27.7% upside based on the closing price of $42.69 on February 5, 2026. The revised valuation utilizes a sum-of-the-parts methodology, applying a 14x EV/EBITDA multiple to the domestic business (up from 13x) and 20x to the international DayOne segment. Nomura expects domestic AI data center demand to accelerate through fiscal years 2026 and 2027, primarily driven by easing chip supply bottlenecks. This includes the potential resumption of H200 shipments to China and increasing availability of domestic alternative processors from Cambricon, Huawei, and Alibaba's T-Head. To fund this capacity expansion, GDS raised $685 million over the past year through the sale of DayOne shares and a private placement of convertible preferred notes.

Consequently, Nomura upgraded its forecasts for annual new contract commitments from 100,000 square meters to 115,000 square meters for both FY26 and FY27. This acceleration is expected to support robust EBITDA growth in FY27 and help alleviate pressure regarding minimum commitment renewals. The firm also raised its revenue forecasts by 1.7% to 5.1% and adjusted EBITDA by 1.2% to 5.8% over the same horizon. Key upside catalysts include the announcement of significant new orders, better-than-expected AI capital spending by Chinese cloud providers, the launch of next-generation foundation models, and upward valuation revisions from DayOne's subsequent funding rounds.