Top 2 stocks to buy as AI fuels demand for liquid cooling in data centers
As AI increases the need for efficient data center infrastructure, liquid cooling technology gains importance. Nvidia's CEO emphasizes the shift from air to liquid cooling due to the demands of AI chips. Two stocks to consider are Vertiv Holdings Co (NYSE: VRT), well-positioned for this trend, trading at a discount with a 0.12% dividend yield, and Johnson Controls International Plc (NYSE: JCI), recognized for HVAC systems and now venturing into liquid cooling, rebounding 35% from lows with a 2.07% dividend yield. Analysts show a positive outlook for both companies.
As artificial intelligence (AI) accelerates the need for advanced data center infrastructure, liquid cooling is emerging as a critical technology.
Nvidia’s CEO, Jensen Huang, highlighted in a recent earnings call that the rising complexity and power demands of high-end AI chips are pushing data centers to transition from traditional air cooling systems to more efficient liquid cooling solutions.
This shift is not only driven by the need for enhanced cooling but also by the significant cost savings associated with more energy-efficient cooling technologies.
For investors looking to capitalize on this growing trend, here are two top stocks poised to benefit from the surge in demand for liquid cooling technology.
Vertiv Holdings Co (NYSE: VRT)
Vertiv Holdings is a key player in the data center infrastructure sector, based in Westerville, Ohio.
With a strong focus on providing data center solutions, Vertiv is well-positioned to benefit from the shift toward liquid cooling.
The company recently reported earnings that exceeded Wall Street’s expectations, showing robust year-over-year growth in both profit and revenue.
Despite a more than 20% decline from its peak in late May, Vertiv is currently trading at a discount, making it an attractive investment opportunity.
Additionally, it offers a modest dividend yield of 0.12%, which adds to its appeal.
Analysts are optimistic about Vertiv’s future, with a consensus “buy” rating and a target price of $103, indicating a potential upside of approximately 28% from its current level.
Johnson Controls International Plc (NYSE: JCI)
While Johnson Controls is traditionally known for its HVAC systems, the company is now exploring opportunities in the liquid cooling space.
As data centers increasingly adopt liquid cooling to meet the demands of modern AI applications, Johnson Controls’ expertise in building management and environmental control positions it well for future growth in this sector.
Currently, only 5.05% of data centers use liquid cooling, but this figure is expected to grow at a compound annual growth rate of 40%, according to RBC.
This anticipated growth makes Johnson Controls a compelling investment, especially given its recent performance.
The stock has rebounded 35% from its year-to-date low and offers a healthy dividend yield of 2.07%.
Analysts have an “overweight” rating on the stock, with a target price of $77, suggesting a potential upside of around 10% from its current price.
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