Why AI Frontrunner Vertiv Holdings Stock (VRT) is Temptingly Overpriced

TipRanks

Tue, Apr 15, 2025, 5:57 AM 5 min read

AI data centers have been a fascinating and lucrative market corner in the last few years, sending many traditional industrial names, such as Vertiv Holdings (VRT), into the big leagues. Now sitting as one of the most direct plays on the infrastructure surrounding AI, it has become one of the key players in the cooling and thermal systems that keep this technology operational.

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However, with the share price up well over 607% in the last five years, investors would have good reason to question whether there is room for further upside or if the market has already priced in the perfect scenario going forward. I’m leaning towards the cautious side here, and although some estimates suggest there could still be enormous potential to be realized, I think there could still be a long way down for investors if uncertainty lingers.

As many would expect, the recent frenzy around AI companies means the company is thinking ahead. Net sales jumped 27% in the last year for Q4, showing strong growth across all regions. Operating profit soared by a healthy 53% to $504 million, with EPS up 77% in the same period.

Such numbers can be hard to match over the long term, but management has presented some impressive guidance for 2025, with a record backlog of $7.2 billion, sending EPS a further 25% higher to $3.55. Of course, this is no surprise in the AI sector, but from my perspective, this is not just a company catching a lucky break in an emerging area of the market; it’s been preparing for this revolution for some time and has plenty of plans to make the most of it.

By perfecting the technology needed for data centers and telecoms sites long before AI became the buzzword all companies have been chasing, Vertiv has built a presence at the heart of hyper-scaling AI cluster deployment. By moving away from providing cooling units and thinking more about integrated systems, management has offered customers a wide range of full-stack solutions, including intelligent monitoring and system prefabrication.

Most investors would probably agree that AI is the most dynamic topic in the market, making companies with a competitive moat incredibly compelling at the right price. We already know that demand for AI will likely be strong, meaning that workloads will consistently need cooling systems at scale. If Vertiv management can continue to capture this opportunity and build further income streams, growing earnings and margins will likely be the outcome.