Vertiv (NYSE: VRT) stock is a popular pick-and-shovel play on the increased build-out efforts related to artificial intelligence (AI) data centers. The company provides key cooling and power infrastructure for AI data centers, and on Feb. 11, its stock surged 34% after the company reported stellar fourth-quarter earnings results.
Here’s what investors need to know about Vertiv and whether it’s a buy, hold, or sell.
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Vertiv is in an excellent position to benefit from the multiyear secular trend in data center construction. As the use of AI increases, hyperscalers that provide AI services need to expand capacity to meet the growing demand.
The company is positioning itself as an important partner in the AI ecosystem, particularly in high-density cooling and power. It’s working with Nvidia to design 800V DC power architectures, which it plans to release later this year, aligning with the roll-out of Nvidia’s Rubin Ultra platforms next year.
In addition, it has introduced the Vertiv OneCore prefabricated modular data centers. This is a standardized architecture that pre-integrates power, thermal management, racks, software, and services into a single unified system, enabling customers to deploy capacity more quickly to meet hyperscalers’ speed-to-market needs.
Vertiv is seeing very strong demand for its power and thermal management products. For example, in the fourth quarter, organic orders grew 252% year over year, helping its backlog grow to $15 billion, more than doubling over the past year. Another positive sign is its book-to-bill ratio of 2.9, indicating that demand is far outpacing the revenue it’s currently recognizing.
While the opportunity is huge, there are some risks associated with the high valuation expectations and potential shifts that could displace its current hardware.
One risk is that hardware technology may shift, for example, if chip architecture advances and reduces the need for extensive cooling. In January, Nvidia CEO Jensen Huang said the company’s next-generation Vera Rubin chips may not require water chillers, prompting a brief sell-off in cooling stocks.
Another risk is its lofty valuation. The stock looks very pricey at 72.3 times its trailing-12-month earnings per share. Analysts are forecasting strong growth, expecting non-GAAP (adjusted) earnings per share to increase by 44% in 2026 to $5.99 and by another 33% in 2027, to $8.01.
