For years, Nvidia has dominated the data center GPU market, fueling the artificial intelligence (AI) revolution alongside Advanced Micro Devices (AMD). While both companies remain at the forefront of AI-driven computing, investors may be overlooking another crucial player in the AI infrastructure boom—Vertiv (VRT -3.44%).
The Backbone of AI: Data Centers and Cooling Solutions
AI-driven workloads require powerful processors, which, in turn, demand massive energy consumption and effective cooling solutions to maintain optimal performance. In 2023, data centers accounted for approximately 4% of U.S. electricity consumption, a figure projected to triple by 2028, largely due to AI adoption.
Unlike Nvidia and AMD, which focus on processing power, Vertiv specializes in data center infrastructure solutions, including power management and cooling systems. Its liquid cooling technology, an alternative to traditional air conditioning and fan-based cooling, is gaining industry traction as AI-powered data centers scale up.
Recent revenue trends indicate accelerating growth, with Vertiv’s order book expanding by 37% over the past year. Liquid cooling has played a key role in this momentum, as data centers increasingly require efficient thermal management solutions to handle high-performance GPUs.
AI Infrastructure Spending: A Major Growth Catalyst
As AI adoption grows, major technology firms are investing billions in new data center infrastructure. Several high-profile projects have recently been announced, signaling long-term demand for companies like Vertiv:
- OpenAI, Oracle, and SoftBank have launched Stargate, a $500 billion AI infrastructure project.
- Microsoft has committed to an $80 billion expansion in data center capabilities.
- Meta has allocated $65 billion toward AI-related infrastructure development.
These capital expenditure surges by hyperscalers could serve as a major tailwind for Vertiv in the coming years, as the demand for efficient power and cooling solutions increases alongside AI expansion.
A Potential Challenge: DeepSeek’s AI Model and Market Uncertainty
Despite the promising outlook, a new development in AI technology could alter investment dynamics in the sector. The Chinese AI start-up DeepSeek has claimed to have trained a ChatGPT competitor using legacy Nvidia chips, raising questions about whether cutting-edge GPUs are essential for advanced AI models.
If DeepSeek’s approach proves viable, technology firms may reassess their AI infrastructure investments, potentially leading to lower spending on new GPUs and data centers. However, conflicting reports suggest DeepSeek may have used more advanced hardware than initially disclosed, leaving its long-term impact on AI infrastructure spending uncertain.
Is Vertiv a Smart Investment Right Now?
At its current valuation, Vertiv trades at a 30x forward price-to-earnings (P/E) ratio, which is above the S&P 500 average (24x P/E). While the company’s growth potential remains strong, uncertainty surrounding AI infrastructure budgets could influence its future trajectory.
Investors should closely monitor big tech earnings calls and Vertiv’s upcoming Q4 earnings report in early February to gauge how AI infrastructure spending will evolve. Until more clarity emerges, strategic patience may be the best approach for those considering Vertiv as an investment in the AI-driven data center market.