HVAC names slide as Nvidia says Rubin chip could reduce cooling needs

Shares of Aaon (AAON) are trading lower on Tuesday on concerns that Nvidia’s (NVDA) Rubin chips could reduce data center cooling needs. The comments made by the chip giant’s CEO also sent shares of other U.S. heating, ventilation and air conditioning-related companies like Johnson Controls (JCI) and Trane Technologies (TT) into negative territory. Speaking at the Consumer Electronics Show in Las Vegas on Monday, Nvidia’s Jensen Huang also said the company’s next generation of chips is in “full production,” and that the Vera Rubin platform is expected to debut later this year.

RUBIN PLATFORM: Nvidia launched the Nvidia Rubin platform, comprising six new chips designed to deliver one AI supercomputer. “Rubin arrives at exactly the right moment, as AI computing demand for both training and inference is going through the roof,” said Jensen Huang, founder and CEO of Nvidia during CES. 
“With our annual cadence of delivering a new generation of AI supercomputers – and extreme codesign across six new chips – Rubin takes a giant leap toward the next frontier of AI.” The Rubin platform introduces five innovations, including the latest generations of Nvidia NVLink interconnect technology, Transformer Engine, Confidential Computing and RAS Engine, as well as the Nvidia Vera CPU.

Haung said the company’s next generation chips are in “full production” and can deliver five times the AI computing of the company’s previous chips. According to the executive, the chips are expected to arrive later this year and are already being tested by AI companies.

OPPORTUNITY UNCHANGED: Aaon shares are underperforming on Tuesday on concerns that Nvidia’s Rubin chips reduce the need for chillers, but this appears overdone and creates a buying opportunity, William Blair told investors in a research note. The firm believes data center cooling demand remains intact, with excess heat still requiring solutions such as free-cooling chillers, CDUs, dry coolers, and airside cooling, all areas where Aaon has existing offerings. William Blair has an Outperform rating on Aaon shares.

PRICE ACTION: In afternoon trading, shares of Aaon are trading down more than 2% after recovering part of early trading losses. Johnson Controls and Trane Technologies are also underperforming, sliding almost 7% and 4% to $113.40 and $376.07, respectively.