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An Emerging Powerhouse in Data Center Infrastructure – More than 500% in 12 months

Analyst Team trader
Updated 22 Apr 2024

In an era where artificial intelligence (AI) is seen as a driver of technological advancement, industries across the globe are rapidly adapting to get involved. Among the sectors reaping the benefits of AI, data centers have emerged as critical infrastructure, facilitating the exponential growth in computing power required to fuel AI applications that range from ChatGPT to various burgeoning AI-driven analytics platforms.

One company carving a niche in this high-growth arena is Vertiv Holdings (NYSE: VRT), which has traditionally flown under the radar when compared to giants like Nvidia. Vertiv's share price has sky-rocketed since the beginning of the year 69.04%, and in the past year, a 506.05% growth has caught many unawares. With earnings just a couple of days away (call scheduled for April 24th), we take a look at what has been going on at VRT.

The company specialises in designing and producing hardware that is essential to maintaining and optimising data center performance, such as heat collection systems and advanced liquid cooling solutions. With energy efficiency taking center-stage in the tech world's push toward sustainability, Vertiv’s efforts to minimise energy consumption in data centers are particularly noteworthy.

Significantly, the data center industry is no economic backwater, with forecasts pegging the total addressable market at an impressive $438 billion by 2028. This includes not only the advanced IT architecture solutions like storage clusters and server racks that enable vast amounts of data processing but also the crucial network infrastructure that undergirds our connected world.

Financial performance speaks volumes, and helps the firm display its prowess in the sector. The company witnessed revenue growth in several key areas: a robust 28% for critical infrastructure and solutions, a solid 12% for integrated rack solutions, and a more modest but still healthy 7.5% for other services for the year ending December 31. An indicator of the company's ongoing success and future optimism is the 23% growth in backlog recorded in the fourth quarter, culminating in a record $5.5 billion.

In a significant development, Vertiv was chosen to join Nvidia's partner network, recognising the company's ability to tackle the infrastructure challenges brought on by accelerated computing. This partnership reflects Vertiv’s industry acknowledgment and potential to continue scaling as computational demands grow.

Vertiv's stock performance adds another layer of intrigue. The company’s shares have rocketed by 545% over the last year, undoubtedly turning heads in the investment community. Despite this surge and a forward price-to-earnings (P/E) ratio of 35—which suggests a steep valuation even by tech industry standards—the momentum behind Vertiv's stock continues, buoyed by robust revenue growth and burgeoning opportunities in the AI-driven data center market.

As the data center market continues its expansion with AI trends propelling demand for advanced infrastructure solutions, Vertiv Holdings stands out as a potential beneficiary. Investors looking beyond the AI chipmakers may find in Vertiv a compelling prospect, thanks to its specialised focus, significant revenue growth, and its strategically important role in the evolving digital ecosystem. However, as with all investments, potential returns are weighted against valuation risks, and Vertiv's recent performance sets a high bar for the future. Thus, as the AI wave sweeps across industries, Vertiv's journey will be one for investors to watch with keen interest.


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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.