Vertiv (VRT), a provider of power and thermal management solutions, has seen its stock rise by more than 158% in the past 12 months, especially since hitting its lowest point in August. This is great for shareholders, but disappointing for me, as I spent some time deciding between buying Vertiv or adding more Super Micro (SMCI) stock to my portfolio in early August, and I chose the latter. Even though I missed out on Vertiv then, I’m optimistic about its future. Given its strong position in a rapidly growing AI-driven market, I believe Vertiv’s stock has more room to climb, even after surging over 1000% over the past five years.
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Driving Another Year of Picks & Shovels Growth
My bullishness on Vertiv is buoyed by more strong forecasts on AI and data center growth in 2025, with the broader AI industry still focusing on “picks and shovels” of the sector. The global data center cooling market, projected to grow at a 14.5% CAGR (compound annual growth rate) through 2030 — although I’ve seen many varying forecasts — underscores this trend.
This trend was also reinforced, rather publicly, during a recent Donald Trump press conference from Mar-a-Lago. Trump introduced Emirati billionaire Hussain Sajwani, founder of the property development company DAMAC Properties, who announced a $20 billion plan to build and lease data centers in the U.S.
For context, data center cooling accounts for 40% to 50% of power consumption and somewhere between 24% to 35% of total operational costs. Companies providing power, cooling, and scalability solutions are thriving as hyperscalers and enterprises expand AI data center capabilities. As such, in 2025, Vertiv remains a critical “picks and shovels” provider for AI, leveraging the surging demand for data center infrastructure.
Trump Sparks Tailwinds for Vertiv
Once again, building on my note above, I’m bullish on Vertiv because Donald Trump’s return to office in 2025 could potentially benefit Vertiv. In addition to the DAMAC investment, seemingly brokered by Trump, his focus on AI development and keeping America at the forefront of technology may drive increased demand for high-performance computing infrastructure. In theory, this is another supportive trend for Vertiv.
Capitalizing on Competitive Edge
I’m also bullish because of Vertiv’s apparent momentum and competitive advantage. Vertiv’s Q3 2024 results demonstrated impressive growth, with revenue reaching $2.07 billion, a 19% increase year-over-year. Meanwhile, the company’s organic orders for the trailing twelve months ended September 2024 grew by approximately 37%, consistent with the previous quarter’s growth rate. This suggests that the order book is growing faster than the industry.
Building on the above, Vertiv displays something of a competitive advantage given its state-of-the-art solutions in power and thermal management. The company’s copper-based cold plate and direct-to-chip cooling solutions integrate seamlessly into existing data centers, avoiding costly upgrades. These systems are 3,000 times more effective than air cooling and enhance computing density by allowing servers to be stacked closer together. Additionally, their flexibility ensures support for both current and next-generation computing demands.
The company’s expansion and technological positioning in power and thermal management, coupled with Vertiv’s partnership with Nvidia (NVDA) to co-develop power and cooling solutions, further highlight its role as a key enabler in AI’s exponential growth trajectory.
Vertiv’s Valuation Is Cheap, Yet Risky
Vertiv’s valuation presents a mixed picture, but broadly I find it attractive. The company’s forward price-to-earnings-to-growth (PEG) ratio of 1.33 is attractive compared to the sector median — a 29% discount to the industrials sector average. However, near-term valuation metrics paint a riskier picture. Vertiv’s price-to-earnings (P/E) ratios, both TTM and forward, are significantly higher than sector medians and its 5-year averages. For instance, the forward P/E Non-GAAP of 48x is 140.2% above the sector median. Similarly, EV-to-EBITDA and EV-to-Sales ratios represent substantial premiums.
Personally, I believe Vertiv stock will continue to push higher, partially because it has continuously beaten earnings expectations in the last seven quarters. This is a really strong track record and suggests that realized growth could be stronger than the forecasts suggest.
Is Vertiv Stock a Buy?
On TipRanks, VRT comes in as a Strong Buy based on 12 Buys, two Holds, and zero Sell ratings assigned by analysts in the past three months. The average VRT stock price target is $144.55, implying an about 12.12% upside potential.
The Bottom Line on Vertiv Stock
I’m bullish on Vertiv as it stands to benefit from continued demand in the AI and data center markets. The company’s innovative cooling and power solutions, alongside its partnership with Nvidia, position it as a vital player in the infrastructure enabling AI’s exponential growth.
While valuation metrics show some near-term risks, Vertiv’s consistent earnings outperformance and robust order growth highlight its potential. Broader trends, such as increased private investment and government focus on AI development, further strengthen its outlook. For those looking to invest in the “picks and shovels” of AI, Vertiv offers an interesting and attractive opportunity in a rapidly evolving market, even at a higher price.
