This Data Center Stock Could Go Parabolic Following Nvidia’s Blackwell Launch

Believe it or not, Nvidia was once a company primarily focused on the gaming market. But over the last two years, the company has emerged as the world’s preeminent AI operation. How did that happen? One key element is an advanced chipset known as a graphics processing unit (GPU). GPUs are a critical piece of infrastructure in developing generative AI, and they’ve become a business worth tens of billions of dollars for Nvidia.

Later this year, Nvidia is expected to release its most powerful GPU architecture yet — known as Blackwell. While this will surely be a tailwind for the semiconductor darling, there is another tempting opportunity hiding in plain sight. This article will break down how the Blackwell launch could make data center company Vertiv (NYSE: VRT) a lucrative choice for AI investors.

How Big is Blackwell Going to Be?

It’s tough to say for certain how big of a business Blackwell will become for Nvidia. However, early insights from industry research analysts hint at the release being a major success. Last month, Morgan Stanley noted forecasts indicating that Blackwell could generate $10 billion in revenue just in Nvidia’s fourth quarter. Shortly thereafter, Morgan Stanley analyst Joseph Moore issued a report stating that Blackwell GPUs are already sold out for the next 12 months. This reinforces Nvidia CEO Jensen Huang’s assertion that demand for Blackwell is “insane.”

Why Vertiv Should Benefit

At their core, GPUs have the ability to process sophisticated programs and algorithms that help train machine learning applications or large language models (LLMs). While this might sound straightforward, GPUs are far more complex than running a software program on your laptop. IT architecture specialists such as Super Micro Computer or Dell Technologies help build the infrastructure that houses GPUs. Essentially, GPUs are integrated into clusters on server racks situated inside data centers.

Since chipsets are constantly running programs and processing data, it is no surprise that data centers consume high levels of energy and face risks of overheating. Currently, data centers typically rely on air conditioning units, power generators, and fans to counteract heat. However, as AI infrastructure spending continues to rise, data centers will need to identify more efficient ways to manage heat. This is where Vertiv comes into the picture.

Vertiv specializes in an alternative method of managing data center energy protocols known as liquid cooling. According to research firm TrendForce, liquid cooling is projected to increase its penetration rates in data centers over the next 12 months — rising from about 10% today to 20% by 2025. The main catalyst driving this surge in liquid cooling? Nvidia and Blackwell.

Is Vertiv Stock a Buy Right Now?

Following a 130% rise in share price throughout this year, Vertiv stock is trading near all-time highs at around $110. Moreover, investors appear to have high expectations for Vertiv. The company’s 12-month forward price-to-earnings (P/E) ratio of 31.7 is significantly above that of the average forward P/E of the S&P 500, which is about 24. This premium could indicate that investors view an investment in Vertiv as one that could deliver higher gains compared to the broader market.

Nevertheless, Vertiv remains a compelling opportunity that may benefit indirectly from a strong Blackwell launch. Given that Blackwell is reportedly sold out for the next 12 months, Nvidia will likely need to ramp up its manufacturing relationships, as many companies that sought the new GPUs may not have been able to secure them. This leads to the conclusion that Blackwell stands to be more of a long-term tailwind for the data center market and particularly for liquid cooling specialists.

In summary, Vertiv is well positioned to capitalize on the demand for Blackwell and emerge as a subtle winner as businesses continue building out their data center infrastructure alongside their GPU investments.