Vertiv (VRT) experienced a rebound in its stock price on Friday after a sharp decline the previous day, triggered by reports surrounding Amazon Web Services (AWS) developing a new liquid-cooling system for its data-center operations. This development raised concerns about potential competition for Vertiv’s cooling solutions.
Analysts on Wall Street have largely viewed the market’s reaction as exaggerated. Deutsche Bank analyst Nicole DeBlase referred to the drop as a “knee-jerk reaction,” highlighting the inherent uncertainty surrounding customer disclosures in the liquid cooling sector.
AWS unveiled its proprietary In-Row Heat Exchanger (IRHX), designed specifically to cool Nvidia (NVDA) processors that handle artificial intelligence processes. This system is compatible with both new and existing data centers. Following the announcement, Vertiv’s stock plummeted, hitting a low of 14.3% during intraday trading. It ultimately closed down 6% for the day, while the shares of nVent Electric (NVT) dipped 0.7%.
However, Friday saw a recovery with Vertiv stock rising over 2% to reach 123.54, while nVent edged up slightly to 74.78.
DeBlase emphasized that AWS’s new solution was likely derived from established liquid-cooling technology providers like Vertiv and nVent. She stated, “While AWS’s In-Row Heat Exchanger is a proprietary solution, we believe it incorporates components from scaled suppliers rather than being solely AWS’s creation.” Her assessment suggests that opportunities in the liquid cooling market remain viable for both companies.
Separately, UBS analyst Amit Mehrotra maintained a buy rating on Vertiv, setting a price target of 135. He dismissed concerns that AWS’s developments would diminish Vertiv’s sales, insisting that the scale of manufacturing required for a complete liquid cooling system is not something AWS aims to undertake. “Given the long-standing relationship between the two companies, it’s more plausible that Vertiv is collaborating with AWS on this initiative,” he noted.
Similarly, TD Cowen’s analyst Michael Elias supported this view, indicating through industry checks that Vertiv serves as a crucial outsourced manufacturer for AWS’s IRHX solution, and also rated the stock as a buy with a target of 133.
In summary, despite initial panic in the market, many analysts believe that Vertiv’s foundational role in liquid cooling technology and its strategic partnerships with major tech players position it well for continued growth.
