Jensen Huang stated that there is no need to rely on chillers, and cooling equipment stocks once plunged 20%

NVIDIA CEO Jensen Huang's remarks on next-generation chip cooling technology at CES have raised concerns among investors about the demand for data center cooling equipment, leading to a collective plunge in related stocks on Tuesday.

At the CES exhibition in Las Vegas, Jensen Huang stated that server racks equipped with the next-generation NVIDIA Rubin chips support liquid cooling, eliminating the need for chillers.

Chillers are typically one of the core pieces of equipment provided by companies like Trane and Johnson Controls for data centers.

On Tuesday, related concept stocks for data center cooling equipment saw widespread declines. Johnson Controls' stock price plummeted by as much as 11%, marking the largest intraday drop since 2022. Modine Manufacturing's decline narrowed from about 21% to 7.44%. Trane also fell.

This sell-off reflects a reassessment by investors of the investment logic behind artificial intelligence infrastructure. Last year, the stock prices of these companies surged significantly due to the AI boom, with Johnson Controls accumulating a 52% increase by 2025.

Concerns Over Demand Triggered by Liquid Cooling Technology Evolution

Baird analyst Timothy Wojs noted in a report to clients:

Jensen Huang's comments have raised some questions and concerns about the long-term positioning of chillers in data centers, especially as liquid cooling technology becomes more prevalent.

He added that liquid cooling technology allows systems to operate at higher temperatures.

Although Wojs believes that cooling companies' recent performance expectations will not face significant risks, he anticipates that "this news will trigger some additional concerns regarding orders, especially in the second half of 2026."

Barclays analyst Julian Mitchell stated that Vertiv holds a "strong position" in the liquid cooling sector and may benefit from the technological developments discussed by Jensen Huang, but its cooling business could be adversely affected. The company's stock price fell by as much as 6.8% on Tuesday before rebounding.

Mitchell wrote:

Given NVIDIA's significant position in the entire AI ecosystem, their comments should not be underestimated, even though they may seem somewhat exaggerated at first glance.

Analysts Claim Sell-off is Excessive

Citi analyst Andrew Kaplowitz told clients that the behavior of investors fleeing cooling stocks is "excessive."

He stated that cooling system manufacturers have established partnerships with chip manufacturers and data center operators, and the risks of falling behind as data center technology evolves are manageable. Kaplowitz remarked:

While we acknowledge that the comments related to Rubin highlight the rapid evolution of data center thermal management technology, we believe this has not caught our companies by surprise Jensen Huang's remarks at CES also fueled the latest round of gains in data storage stocks, another sector influenced by the AI boom.

SanDisk's stock price surged over 27%, making it the best-performing stock in the S&P 500 index on Tuesday, after Jensen Huang emphasized the demand for memory and storage. The stock has soared over 1000% since its low point in April last year.