Data center infrastructure and Nvidia partner Vertiv (VRT 1.40%) is a Wall Street darling. Of the 24 analysts covering the stock, 17 have "buy" ratings, with four "outperforms" and three "holds."
Why Wall Street loves Vertiv
The AI/data center space is hot right now. Burgeoning demand for power-hungry AI applications is driving investment in data centers, the power solutions that run them, and Vertiv's power, cooling, and IT infrastructure that enable them.
NYSE: VRT
Key Data Points
Is AI/data center spending in a bubble?
There is probably some truth to the assertions that a bubble is forming around AI, as history shows us that investors tend to overshoot on the way up and then undershoot on the way down. However, history shows that it's tough to predict which innings of the bubble we are in, and long-term investors make a lot of money by not selling too soon.
Vertiv is a case in point. The company started 2025 with the midpoint of its full-year guidance at $9.2 billion in sales and $1.935 billion in adjusted operating profit. Still, a strengthening in its order book now means management expects $10.2 billion in sales and $2.06 billion in adjusted operating profit. Incidentally, profits would be even higher if not for tariff cost headwinds.
If you had sold out based on a $1.935 billion profit, you would have missed out on most of the 68% rise in the stock price this year.
However, valuations still matter, and the stock is now priced at 48 times estimated 2025 free cash flow (FCF) and 41 times Wall Street estimates for next year's FCF. It's probably a good time to take some profits while keeping an eye out for more acceleration in its earnings momentum.
Vertiv is a great way to play the AI/data center spending boom, but the big increase in the stock price has probably made a larger-than-average position in most portfolios, and now might be a good time to adjust position sizes.
