By Andrew Rocco, Zacks,Trades Of The Day, 2024-09-24
Zacks Rank #1 (Strong Buy) stock Vertiv Corporation (VRT) offers infrastructure solutions for data centers and communication networks for commercial and industrial use. Vertiv provides services such as power and thermal management as well as IT infrastructure to guarantee the effectiveness and dependability of operations. By partnering with Vertiv, tech companies can enhance their efficiency levels, reduce disruptions in operations, and sustain connectivity.
Vertiv is essential in fueling AI advancement by offering the infrastructure for handling the computational requirements of AI applications. Furthermore, smart monitoring and software management aid in optimizing energy usage.
Vertiv: Selling “The Picks and Shovels” to the AI Revolution
OpenAI's ChatGPT recently became the fastest-growing consumer application of all time. Large language models (LLMs) such as the ChatGPT Chatbot require massive training models powered by data centers. Because of the growing interest in artificial intelligence, tech juggernauts such as Microsoft (MSFT), Tesla (TSLA), Alphabet (GOOGL), Oracle (ORCL), and Meta Platforms (META) are in a data center arms race. Over the next six years, Jefferies Research expects data center capacity to soar 12x (from 2024 to 2030). Vertiv will be a main beneficiary.
Image Source: Jefferies
Three Mile Island Revival Underscores AI Need for Energy
Friday morning, Microsoft and nuclear plant owner Constellation Energy (CEG) announced a massive deal to revive the closed Three Mile Island by 2028 to power its data centers. Data center energy consumption is expected to account for as much as 8% of the world's electricity if no action is taken. The blockbuster $1.8 billion deal between MSFT and CEG underscores two critical factors in the AI revolution:
1. Big Tech's Commitment to Building out Data Centers.
2. Energy's Role in that Buildout.
Vertiv's business intersects where these megatrends meet. In 2023, Vertiv scored a partnership with Nvidia (NVDA), the undisputed AI leader for its innovative and highly efficient cooling technologies for data centers, which was put on display during the United States Department of Energy's (DOE) “Cooler Chips” award program.
Vertiv is a Consistent Earnings Winner
Vertiv has eclipsed Zacks Consensus Estimates for six straight quarters, and analysts forecast that earnings will continue to grow at a healthy double-digit pace well into 2025.
Image Source: Zacks Investment Research
VRT Channel Breakout
VRT shares endured their first pullback in the current bull run. Typically, the first significant pullback in a leading stock in a leading industry is buyable.
Image Source: TradingView
Bottom Line
Datacenters are necessary ingredients for the AI revolution. Vertiv operates in the two most important and high-growth AI realms: datacenter and energy efficiency. Expect shares to notch fresh highs in late 2024 or early 2025.
— Andrew Rocco
Source: Zacks
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