Shares of cooling infrastructure play Vertiv (NYSE:VRT | VRT Price Prediction) are starting to get hot again, now up more than 50% year to date. Undoubtedly, the stock might look a bit bubbly today, especially after the latest parabolic move. The AI infrastructure firm, now worth $101 billion, might also seem expensive after the latest run, but, arguably, it’s looked pricey and overheated almost every step of the way.
With the firm joining the S&P 500 and numerous Wall Street analysts continuing to stand by the stock, even amid overbought conditions, questions linger as to whether it still makes sense to step in as a buyer here. Indeed, it’s the AI infrastructure stock that’s still working, even as the rest of the AI trade looks to hit the pause button for a while. With the latest spike coming after a far better-than-expected quarterly earnings result alongside an upbeat outlook, perhaps there is no better place to be as the orders keep on coming.
Shares might look expensive, but the growth spurt supports such a multiple
While shares of Vertiv certainly have a lot baked in after that strong earnings showcase, they certainly don’t look obscenely priced at 77.4 times trailing price-to-earnings (P/E), especially given the order momentum, which could beget even more strength. On a price-to-sales (P/S) basis, the stock looks quite modestly priced at just shy of 10.0 times sales. And, on a forward P/E basis, the name might actually be a bargain at close to 43 times forward P/E if you’re in the belief that AI is anything more than a bubble.
Either way, the picks and shovels continue to be the place to be and, in that regard, cooling infrastructure is a must. With hyperscalers committing hundreds of billions, Vertiv isn’t a company that has a giant question mark surrounding its ROI. It’s poised to make real cash flows, perhaps far sooner than most other AI plays that haven’t yet proven themselves. In any case, the big question for investors is what happens if the big spenders just keep raising the bar on data center spending?
Why I wouldn’t bet against the AI data center buildout
If cash flows, ROI figures, and job cuts come in from the biggest of spenders, perhaps the sky-high spend acts as the new floor going into the next year and the year after that. Could it be that the great multi-year AI data center buildout requires even more capital to feed the needs of the kinds of AI applications to come?
It’s very much possible. But who knows what the reaction of investors will be as the hyperscalers get sent to the penalty box. In any case, cutting non-AI items to finance more aggression on AI seems to be an industry trend that I think won’t slow down anytime soon. In my view, Jack Dorsey is a visionary who seems to know where the industry is headed next.
After steep cuts and rapid AI improvement going on behind the scenes, I view Dorsey’s 40% staff cuts as a potential canary in the coal mine. With reports of 20% cuts over at Meta Platforms (NASDAQ:META), perhaps the cost savings from AI aren’t all too far off to justify not only the current spend (for 2026), but higher spend in 2027.
AI chips are hot, and that’s exactly why Vertiv is the play
Liquid cooling isn’t just a nice-to-have anymore. With the Vera Rubin boom around the corner and all these AI data centers that require their own grid, there’s a lot of heat that needs to be dissipated. And perhaps Vertiv’s high-margin runway may still be underestimated by investors.
At this juncture, the Street-high target on Vertiv stock sits at $305 per share. That’s another 16% gain or so from here. Much of the positives from the last quarter might be priced in already. However, over the long run, I still think there’s more room for more quarters like the one that caused the most recent spike. While cooling infrastructure might not be the “moatiest” way to play the data center buildout, I do think it’s a wildly profitable one that might not be peaking quite yet. Either way, risks remain, and investors should brace for dips on the road higher.
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