Vertiv Holdings: Powering the AI ProgressionNYSE:VRT NASDAQ:NVDA NASDAQ:META NYSE:ETN NASDAQ:CEG
While investors are engaged in a race “identify the next major microchip manufacturer”, a quieter opportunity is emerging at the crossroads of artificial intelligence (AI), infrastructure, and long-term demand. Vertiv Holdings (VRT), a company often overlooked amidst the hype, could be the backbone of the AI boom. In a recent NVIDIA earnings call, CEO Jensen Huang dropped a pretty interesting statement: the biggest hurdle for future data centers isn’t chips or regulations- it’s power.
The Power and Cooling Conundrum
AI is no longer some futuristic bet, it’s more like the engine of modern enterprise. Data centers, once powered by modest CPUs, now rely on NVIDIA’s superior GPUs to handle complex, multi-task workloads at scale. But this shift has exposed a critical bottleneck: energy supply can’t keep up with compute demand. Think of NVIDIA’s GPUs as high-performance supercars-powerful yet fuel-hungry, requiring premium infrastructure to operate efficiently. Data centers face challenges like high carbon footprints, downtime risks (recall the $10 billion CrowdStrike outage from a faulty software update), and intense cooling needs due to soaring rack densities.
And this is where Vertiv (VRT) comes in. This company designs and delivers essential infrastructure-uninterruptible power supplies, power distribution units, and advanced cooling solutions (both air and liquid-based)-tailored for data centers, telecom, and industrial clients. If NVIDIA’s GPUs are the brain, Vertiv is the heart and lungs, ensuring these systems run without melting down. The cooling challenge, in particular, is a game-changer. With rack densities exceeding 300kW, traditional air cooling falls short, making Vertiv’s liquid cooling innovations a must-have.
A Strategic Edge: The META-Nuclear Play
The AI race isn’t just about chips- it’s also about the infrastructure to sustain them. A telling sign came from META, which recently inked a nuclear power deal with Constellation Energy. Why nuclear? It offers low-carbon, reliable, 24/7 power with massive capacity-ideal for AI’s energy demands. Yet, Constellation’s deal didn’t address cooling, a gap Vertiv fills perfectly. This collaboration points a broader trend: companies are scrambling to solve power and thermal management issues, and Vertiv is at the forefront of this effort.
Financial Momentum and Analyst Backing
Vertiv’s financials back up its strategic importance. In Q1 2025, the company reported $2.04 billion in revenue-a 25% year-over-year jump, surpassing the $1.94 billion estimate. Adjusted earnings per share hit $0.64, beating the $0.615 forecast. Its backlog soared 50% to $6 billion, signaling robust future demand, while free cash flow margins doubled to 13% ($1.48 billion). Earnings before interest, taxes, depreciation, and amortization grew 22.8%, with a manageable 1.6x leverage ratio and over $350 million annually invested in R&D-much of it for cutting-edge liquid cooling.
Looking ahead, analysts project revenue of $10.76 billion by 2026, with EPS growth of 22% annually and free cash flow reaching $1.6 billion, even as capital expenditure rises to 18.2%. The sentiment is overwhelmingly bullish: Bank of America, Goldman Sachs, and Barclays maintain "Buy" ratings, with target prices ranging from $115 to $130. Oppenheimer, a top analyst, recently raised its target to $132, while 75% of analysts recommend buying, with only 6.3% suggesting a hold or sell.
Outpacing the Market
Since its liberation date of April 2, Vertiv has outperformed its peers. While the S&P 500 grew 11.48%, NVIDIA rose 45.62%, Eaton Corporation 30.26%, and Constellation Energy 48.3%, Vertiv surged 69.8%. Its focus on data centers and AI-driven infrastructure is reflected in this outperformance, with even uranium ETFs (42.41%) tied to nuclear power trends being outpaced. Vertiv’s faster free cash flow growth and direct exposure to AI’s power and cooling bottlenecks give it an edge over cyclical chipmakers.
A Long-Term Buy?
The thesis is simple: AI is already here and it will stay, and the infrastructure supporting it-especially cooling- is important factor in ensuring the rotation of the gears. Vertiv is quietly becoming, lets say, the NVIDIA of infrastructure, leveraging strong financials, analyst confidence, and a critical role in solving AI’s energy crisis. At a current price of $127.37, with targets up to $132 within the next 18 months (and potentially higher over 2-3 years), VRT could be a pretty confident long-term buy. Unlike chipmakers facing valuation risks, Vertiv may offer stable growth tied to an urgent need, which one is growing today.
Disclosure: I currently hold no positions in VRT, NVIDIA, Eaton, or Constellation Energy.
