Melius downgrades four ‘capex thematic’ stocks as AI momentum trade stalls

As previously reported, Melius Research downgraded Vertiv Holdings (VRT), Eaton (ETN), Johnson Controls (JCI) and Trane (TT), all to Hold from Buy, with respective price targets of $125, $373, $95 and $398. While “not concerned” about earnings results for any of the four in 2025, “or even ’26 for that matter,” the firm is concerned about the multiple that investors will be willing to apply to those results as the emergence of DeepSeek raises the risk that this AI capex “arms race has peaked,” the analyst tells investors. While the “violent market reaction yesterday helps discount a lot of this risk,” the firm does not see an easy outperformance pathway for these stocks from here, adding that “if nothing else, the positive capex revisions part of the spend cycle seems to have peaked.”