The explosive "AI Cooling", Vertiv's growth multiplied by 7 times in two years!

The heat, AI is too hot.

The booming development of AI has led to the emergence of a large number of data centers, causing a surge in electricity demand. The heat dissipation of servers in data centers has become a major issue. American power and cooling system service provider Vertiv has also soared with the "heat wave" of AI.

According to the International Energy Agency (IEA), it is estimated that the electricity consumption of US data centers will increase by about 30% from 2022 to 2026, reaching 260 terawatt-hours, accounting for about 6% of the total electricity demand in the United States, equivalent to the electricity consumption of 24 million US households in a year. Most of this electrical energy will be lost in the form of heat, which means that the demand for server cooling systems will increase.

Opportunities for wealth are right here.

Since the end of 2022, Vertiv's stock price has surged by nearly 700%, with orders in the last quarter increasing by 60% year-on-year. By the end of March, the order volume reached a record $6.3 billion, with about one-third of the company's sales coming from providing cooling systems for data centers.

In the past, mainstream data centers used fans to accelerate air circulation for cooling, but as chips evolve faster and stronger, the heat dissipation effect of air cooling systems will reach its limit.

At this point, the only option is to add water cooling systems to servers for heat dissipation and cooling. Because water has a higher specific heat capacity, the heat dissipation effect is better, with the heat dissipation efficiency of the same volume of water being more than 3000 times higher than that of air. Vertiv's water cooling systems have been well received.

Goldman Sachs predicts that the server cooling market size will grow from $4.1 billion this year to $10.6 billion in 2026, with liquid cooling systems gradually becoming mainstream. The penetration rate of liquid cooling systems in AI data center servers will increase from 23% this year to 57% in 2026.

J.P. Morgan also pointed out that considering the complexity of building liquid cooling systems, the cost of liquid cooling systems is three to four times that of air cooling systems, which will bring higher profits to cooling system suppliers.

As tech giants like Microsoft, Meta, etc., invest heavily in building AI data centers, investors' enthusiasm for stocks of companies like Vertiv that provide cooling technology is also on the rise. According to FactSet data, the PEs of cooling system suppliers such as AVC and Auras Technology are as high as 40 times, while before the AI boom, their PEs were less than 20 times.

This also confirms that selling shovels in the gold rush of AI has always been profitable, but investors still need to keep a cool head