Shares of AI infrastructure provider Vertiv (VRT -0.84%) plunged 27.9% in July, according to data from S&P Global Market Intelligence.
Vertiv is one of the main infrastructure suppliers for AI data centers, supplying electricity and water-cooling systems that are becoming increasingly important as the latest AI-powered chips consume more energy.
The company delivered what appeared to be a solid earnings report toward the end of the month. Still, the report wasn't "perfect," and Vertiv appeared to get caught up in the negative sentiment surrounding AI semiconductors in July, following a huge run-up in their stock prices during the first half of the year.
NYSE: VRT
Key Data Points
Vertiv posts strong growth, but not enough for skittish investors
In July, market sentiment turned sharply negative toward AI-related semiconductor stocks and "AI-adjacent" industrial stocks that serve AI data centers, such as Vertiv.
A combination of prominent short-seller Michael Burry promoting his short bets against AI stocks, the release of China's Kimi 3 open-weight model, and the "blow-up" of AI-focused hedge fund Situational Awareness conspired to send virtually all AI stocks into a tailspin in July.
Vertiv is seen as a key player within the AI data center build-out, providing electrical systems and cooling systems, so it wasn't spared. The predictably negative reaction to a fairly strong but imperfect earnings report at the end of the month capped off a brutal month.
In the second quarter, Vertiv's revenue grew 24% to $3.72 billion, while adjusted (non-GAAP) earnings per share surged 60% to $1.52 per share. While earnings growth beat Wall Street's expectations, even the robust 24% revenue growth figure fell slightly short. Vertiv had grown 30% in its prior quarter, so perhaps that imperfection caused the post-earnings sell-off, as investors were in an unforgiving mood.
Image source: Getty Images.
But the pessimism seems misplaced
The good news for investors is that the "disappointing" second-quarter revenue appears to be due to timing issues rather than a lack of demand. Vertiv forecasts revenue to reaccelerate in the second half of the year, raising third-quarter revenue guidance by $400 million and full-year guidance by $250 million at the midpoint of the range. That implies some revenue spilled from the second quarter to the third quarter, while the overall outlook for the full year actually improved.
2026 adjusted earnings per share are now expected to be $6.70 at the midpoint of the new guidance, putting the current stock price at 40 times this year's earnings expectations.
That seems like a steep price to pay for an industrial stock; however, with the AI build-out continuing and large cloud giants raising billions in new capital to fund it, it doesn't appear that Vertiv's growth will slow anytime soon.
