Northern Data AG (ETR:) has seen a 2% surge in its stock value following the initiation of coverage by CG Capital Markets. The investment firm has given the stock a “buy” rating, reflecting faith in the growth potential of the company’s AI-based data center infrastructure and computing operations.

CG Capital Markets analysts have projected a €60 target price for the stock, expressing confidence in Northern Data’s ability to tap into the growing need for high-performance computing and generative AI services.

The company has undergone a swift transformation from its origins in mining to its current emphasis on AI infrastructure. This strategic shift positions Northern Data as a crucial part of Europe’s expanding AI ecosystem.

The firm’s Taiga Cloud division is slated to be a significant revenue driver, with revenue estimates of approximately €400-440 million in 2025, accounting for over 75% of the group’s overall revenue.

The company’s growth is backed by the adoption of top-tier NVIDIA (NASDAQ:) GPUs and a commitment to energy-efficient, scalable infrastructure.

The potential divestiture of Northern Data’s Peak division was also noted by analysts. Such a move could enhance operational efficiency and provide added capital for the expansion of its AI-centric data center operations.

Aligning with the company’s larger objectives, this transition aims to cater to the escalating demand for AI compute capacity, while retaining a competitive advantage in energy efficiency and sustainability.

CG Capital Markets maintains that, despite recent stock price increases, the stock is still underpriced. They point to a current enterprise value-to-sales ratio that indicates room for more growth as utilization rates and operational efficiencies get better in the upcoming quarters. This could be an attractive prospect for those considering investment in the AI and high-performance computing sector.