Vertiv Stock Drops as Amazon Launches Cooling Competitor. Why These Analysts Say Buy.

Analysts on Wall Street aren’t concerned about Vertiv stock. (Dreamstime)

Vertiv Holdings stock was dropping again Friday in response to Amazon.com Amazon Web Services development of a new cooling system of its own that could disrupt the leader in data-center cooling solutions. Analysts, however, think the selloff is “overblown.”

In a video on YouTube, Amazon.com unveiled a liquid-cooling system it calls the in-row heat exchanger. The infrastructure can be installed in new and existing data centers designed for power-hungry artificial-intelligence computing, the company said.

Vertiv stock sank 6% on on Thursday, after falling as low as 14% earlier in the session. Shares were down another 2.3% in premarket trading Friday.

Vertiv, which didn’t respond to a request for comment from Barron’s, has been a beneficiary of the huge AI and data-center boom. The company’s shares have climbed 35% over the past 12 months and nearly 1,300% in the past three years.

While the latest news seemed to spook shareholders, Wall Street firms were unconcerned.

Liquid cooling is just one piece of Vertiv’s business, Oppenheimer analyst Noah Kaye told Barron’s, and the company’s primary value proposition is as a “one-stop-shop for powering and cooling infrastructure.” Amazon’s announcement does little to change that, Kaye said.

Analysts at TD Cowen saw the news as a positive for Vertiv after the firm’s channel checks indicated Vertiv would be a key manufacturer of Amazon’s new system. Vertiv also produces electrical gear used in Amazon’s data centers, TD Cowen said in a research note Friday.

Deutsche Bank analyst Nicole DeBlase also was confident Vertiv would still play a role in Amazon’s cooling supply chain, even if public information on the topic is limited.

“While we understand the knee-jerk reaction given inherent murkiness in liquid-cooling disclosures, we think this is overblown,” DeBlase wrote in a note.

Wall Street remains bullish on Vertiv as an AI and data-center play. Of the 26 analysts polled by FactSet, 23 have assigned a Buy or Overweight rating to the stock.

If anything, the end-of-the-week dip may provide a chance to pick up more shares, argued Scott Davis of Melius Research. Amazon announcements often cause investors to flee would-be competitor stocks.

“In almost every instance, those pullbacks proved great buying
opportunities,” Davis said.

Time will tell.

Write to Nate Wolf at nate.wolf@barrons.com