Will enabling stolen device protection mean that apple will store my location data on it is servers?

One of the requirements for Stolen Device Protection is that you have Significant Locations turned on. See the following from About Stolen Device Protection for iPhone - Apple Support

To turn on Stolen Device Protection you must use two-factor authentication for your Apple ID and set up or enable the following on your iPhone: a device passcode; Face ID or Touch ID; Find My; and Significant Locations* (Location Services). 

For information about the privacy of Location Services, see Legal - Location Services & Privacy - Apple including the following:

• Significant Locations: Your iPhone and iCloud-connected devices will keep track of places you have recently been, as well as how often and when you visited them, in order to learn places that are significant to you. This data is end-to-end encrypted and cannot be read by Apple. It is used to provide you with personalized services, such as predictive traffic routing, and to build better Memories in Photos.