Vertiv’s Growing Presence in Data Center Infrastructure
Vertiv is a company that focuses on designing, manufacturing, and servicing power and cooling systems specifically for data centers.
Recently, they’ve announced a partnership with Nvidia to create next-generation server infrastructure. This seems promising, especially if the current expansion in data centers continues. Many believe that Vertiv’s stock has good potential right now.
In a year where many other major companies, particularly in Ohio, have struggled, Vertiv has shown remarkable growth. Specifically, its stock has increased over 50% since the start of this year, and more impressively, it has soared more than 850% over the last five years.
So, the question arises: is it still a good time to invest in Vertiv Holdings (New York Stock Exchange: VRT)? Let’s break it down.
Based in Columbus, Vertiv designs and provides services for digital infrastructure, particularly in data centers, commercial facilities, and communication networks. Their main offerings include power systems, cooling solutions, and server racks. They also provide maintenance for these systems. Vertiv employs around 31,000 people across 40 countries, catering to diverse industries like cloud services, finance, and energy.
Vertiv primarily serves large companies known as hyperscalers. These firms manage extensive global networks of data centers, providing large-scale cloud computing and data management services. Major clients include Amazon Web Services, Microsoft Azure, and Oracle.
A key point to consider is that hyperscalers are heavily invested in artificial intelligence (AI), which tends to be resource-intensive. This trend raises the demand for well-structured data centers. It’s worth noting that data centers aren’t just about powerful microchips; they need specialized power and cooling systems to function effectively, and that’s where Vertiv excels.
Experts in power and cooling solutions, Vertiv has become essential for leading players in this space. They’ve recently announced collaborations focused on developing advanced data center technologies.
Nvidia, as the front-runner in AI microprocessors, plays a significant role in shaping hardware configurations for the industry. Vertiv teaming up with Nvidia to redesign power systems is a notable development aimed at increasing efficiency and performance.
Currently, data centers commonly utilize 54 VDC power systems, which limit their capacity. Yet, with next-generation computing on the horizon, there’s a need for megawatt-scale power solutions. The new 800 VDC system, being co-developed by Nvidia and Vertiv, will enhance power capacity significantly.
This latest initiative won’t take effect until 2027, but it’s expected to bolster Vertiv’s backlog of orders, which has already jumped 55% over the past year and a half—from $5.5 billion to $8.5 billion.
Financially, Vertiv has reported robust growth, with net sales up 35%, operating income up 32%, and earnings per share increasing by 42% year-over-year in the last quarter. While the stock price has risen significantly, reaching 55% growth in the past year alone, it’s natural to wonder if the stock might be peaking.
Indeed, the current price is notably higher than in 2023. The company’s price-to-earnings ratio stands at an impressive 83.6. However, it’s essential to consider that the forward-looking ratio is considerably lower at 45.6, positioned between Nvidia and Arista Networks. This suggests there’s still potential for growth ahead.
If you believe in the long-term sustainability of the AI-driven data center trend—and there’s substantial evidence to support that belief—investing in Vertiv might be a wise choice. When compared to many other Ohio-based companies, Vertiv’s future seems promising. For tech investors, it could be a worth exploring.
Before making any decisions about buying Vertiv stock, it’s wise to keep a few factors in mind.
