This investor likes DigitalOcean Holdings right now

Purpose Investments portfolio manager Nick Mersch says DigitalOcean Holdings (DigitalOcean Stock Quote, Chart, News, Analysts, Financials NYSE:DOCN) has transformed from a relatively sleepy developer cloud platform into a compelling AI inference story.

Speaking on BNN Bloomberg Market Call on Aug. 20, Mersch said CEO Paddy Srinivasan has repositioned the company around AI-native cloud infrastructure designed for inference and agentic workloads.

Mersch said DigitalOcean’s advantage is simplicity. Rather than competing head-on with hyperscalers through sprawling product menus and complex contracts, the company is focused on helping developers and smaller businesses get applications running quickly.

“Theirs is much more developer friendly and says, ‘Hey, come on board, and we can kind of get you up and running much quicker,’” he said.

The investor also likes DigitalOcean’s more vertically integrated model, including ownership of the underlying hardware, and said the company can pursue more targeted infrastructure deployments without spending at the scale of the largest cloud providers.

Mersch said that positioning should resonate with startups and entrepreneurs building new AI businesses, particularly those looking for a simpler alternative to the major cloud platforms.

“They’re onboarding these customers early with a much more simple platform than the massive cloud players,” he said.

DigitalOcean shares have gained 266.9% over the past 12 months and 83.8% over five years. Of the analysts covering the stock, 13 rate it “Buy,” three “Hold,” and none “Sell,” with a consensus price target of US$175.21.

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