The artificial intelligence (AI) boom is creating red-hot demand for seemingly unrelated equipment. This provides investors of different risk levels with a way to capitalize on this AI growth. The latest on this growing industry list with AI tailwinds are well-established HVAC (heating, ventilation, and air conditioning) manufacturers. These manufacturers could be perfect for conservative investors who prefer not to risk the high-flying chipmakers or some newbie AI company that may still be years away from earning a profit.
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Hot AI Chips
The massive computing power required for AI generates immense heat. According to Melius Research analyst Jake Levinson, “The key for chipmakers with AI ambitions is keeping data centers cool.”
This translates into a surge in demand for advanced cooling technology from companies like Carrier Global (NYSE:CARR), Trane Technologies (NYSE:TT), and Johnson Controls (NYSE:JCI). Levinson highlights that their HVAC systems are in high demand to tame the heat generated by AI hardware.
Avoiding Chip Burnout
The opportunity extends beyond traditional HVAC companies. Other industrial players are also seeing a surge in demand for components that contribute to data center thermal management.
For example, Parker-Hannafin (NYSE:PH) supplies the fluid connectors that are critical for liquid cooling systems, and Dover (NYSE:DOV) provides industrial pumps used in these setups. Their stocks have reflected this positive trend, up 20% and 19% year-to-date, respectively.
Using the TipRanks Comparison Tool to explore analyst views and other key details, we find that these ancillary companies involved in cooling systems are all large-cap stocks that pay dividends. These are attributes typically found among the holdings of a conservative portfolio.
In terms of Smart Score, Carrier has the lowest score of 5 and an Analyst Consensus rating of Hold, while Parker-Hannafin has the highest, with a Smart Score of “Perfect 10” and an Analyst Consensus of Strong Buy.
Key Takeaway
The AI revolution presents a lucrative opportunity, not just for chipmakers, but also for established HVAC companies that provide essential infrastructure to keep data centers from overheating. Investors looking to capitalize on the AI boom might consider strategically adding these established and well-positioned companies to their portfolios.
