Why Shares of Data Center Equipment Company Vertiv Soared in May
Here's the lowdown.
Data center equipment market fears
As noted, there were legitimate fears around the marketplace. For example, Vertiv itself reported flat year-over-year order growth in the fourth quarter of 2024, and Microsoft was widely reported to have pulled back on some investments in data centers earlier this year. These sorts of developments create fears that the market is set to slow in 2026, leaving the valuations of companies such as Vertiv exposed.
The AI/data market remains strong
That said, you can get a good read on what's going on in a market by looking at suppliers, equipment companies, and the spending plans of key customers, most of which confirmed no sign of any slowdown. For example, as previously discussed, various companies have provided excellent market outlooks in recent months.
For example, management at electrical connection and protection company nVent, a company growing its data center exposure, sees accelerating demand for its solutions,while mechanical and electrical contractor Comfort Systems sees no let-up in demand for contractors on data centers. Vertiv itself reported earnings in late April, and management noted that its one-year pipeline was growing, as was its pipeline beyond one year.
As for Microsoft and another hyperscaler, Alphabet 's Google, the latter's management confirmed its capital spending plans for 2025 and stated that it was "definitely" increasing its spending on AI. Meanwhile, it turns out that Microsoft's pullback on investment in specific locations is more of a case of rebalancing investment where it needs data centers to match demand rather than any pullback in general. Finally, Nvidia's recent results confirmed that the company's underlying demand remains in growth mode.
Where next for Vertiv
With the growth of AI applications driving increased spending on data centers, the outlook remains bright for Vertiv. In addition, Vertiv is already working on the power equipment necessary to work with the next generation of Nvidia's platforms for data centers to be released in 2027. That could drive the next wave of growth for the industry.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Comfort Systems Usa, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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