On Thursday, Vertiv Holdings (VRT) stock fell about 6% after Amazon’s (AMZN) cloud computing unit, Amazon Web Services (AWS), revealed its P6e-GB200 Ultra Servers equipped with liquid cooling infrastructure to support NVIDIA’s (NVDA) Grace Blackwell SuperChip. The announcement raised concerns about the potential in-house production of cooling components by AWS. However, some analysts believe that the selloff in VRT stock seems “overdone.”
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Analysts React to Impact on Vertiv from AWS’ Potential Cooling Tech
Citi analyst Andrew Kaplowitz backed his bullish thesis on Vertiv stock. The 5-star analyst stated that the liquid cooling market remains highly fluid, with AWS announcing its new P6e-GB200 Ultra Servers equipped with liquid cooling infrastructure. However, Kaplowitz thinks that it remains unclear to what extent AWS is producing liquid cooling components in-house versus partnering with suppliers. While Kaplowitz acknowledges investor concerns around the end market dynamics, he views the decline in Vertiv and nVent Electric (NVT) stocks as “overdone.” Kaplowitz has a Buy rating on Vertiv stock with a price target of $130.
Kaplowitz expects strong prior orders to support good near-term visibility for both Vertiv and nVent. The analyst believes that VRT’s competitive advantages, including a market-leading portfolio in power and thermal management, as well as strong relationships with chip manufacturers, remain intact. While he expects such announcements to be made periodically due to the nascent nature of the liquid cooling market, he believes VRT remains poised to be a primary beneficiary of the expected liquid cooling ramp and views the pullback in the stock as a buying opportunity. He highlighted that VRT estimates the liquid cooling market growing from about 15% of the thermal market to 30% by 2027.
Further, RBC Capital analyst Deane Dray, who also has a Buy rating on VRT stock, does not see original equipment electrical manufacturers like Vertiv and nVent Electric being “disintermediated” following AWS’ blog on its new tech. The 5-star analyst contends that this is not “new news,” as AWS posted on June 11 that it was close to launching its custom system. Dray added that it is now common for hyperscalers to develop their own next-generation liquid cooling systems. In fact, electrical manufacturers like nVent provide critical development and test support to hyperscalers for custom systems. He concluded that any “panic selling” in response to this news is overdone.
Meanwhile, Barclays analyst Julian Mitchell sees the possibility of suppliers being involved in AWS’s liquid cooling technology. Furthermore, the top-rated analyst believes that AWS is unlikely to be making the in-row heat exchanger hardware in-house. Mitchell reiterated a Hold rating on VRT stock.
Is VRT a Good Stock to Buy?
Overall, Vertiv Holdings stock scores a Strong Buy consensus rating based on 13 Buys versus two Hold recommendations. The average VRT stock price target of $125.27 indicates about 4% upside potential from current levels.
