Here's Why Shares in This Nvidia Partner Soared in March

Shares in data center equipment company Vertiv Holdings (NYSE: VRT) rose by a whopping 20.8% in March as the company rode the artificial intelligence (AI) investment boom. The stock price took a leg up in mid-March following the announcement that Vertiv would become a Solution Advisor: Consultant partner in the Nvidia (NASDAQ: NVDA) Partner Network.

Data centers are cool

You can't have a burgeoning investment in AI applications without data centers, and you can't have data centers without cooling. As such, Vertiv has a critical role in the growth of AI, a fact acknowledged by Nvidia CEO Jensen Huang at Nvidia's GPU Technology Conference (GTC) a day after the announcement. Huang noted that Nvidia and Vertiv were working on cooling systems, with Vertiv acknowledged as "very important" in ensuring the cooling of data centers.

While that's a red rag to an Nvidia bull, there's reason and hard numbers behind the optimism.

Spending on data centers continues to surge

As previously discussed, there's been an incredible boom in U.S. manufacturing construction investment over the last couple of years, led by investment in semiconductors and electronics, including data centers. In fact, U.S. manufacturing spending came in at $214 billion in 2023 compared to less than $100 billion in 2022 and even lower in the pre-pandemic era.

Moreover, the boom in interest in AI has made spending on data centers higher. For example, here's a look at capital expenditures at leading data center company Equinix. Although it dipped through 2022 in line with a correction after the boom inspired by the pandemic, it's now taken off again. Equinix management expects $2.9 billion to $3 billion in capital spending in 2024.

EQIX Capital Expenditures (TTM) Chart

EQIX Capital Expenditures (TTM) data by YCharts

Vertiv will benefit from booming data center spending

The ongoing spending in data centers is also seen in Vertiv's order growth -- up 23% on a year-over-year basis in the fourth quarter of 2023 and 18% in the third quarter of 2023. Moreover, CEO Giordano Albertazzi expects spending "to continue to be strong up in the high teens on a year-on-year basis in the first quarter across the portfolio" in the first quarter.

As such, Vertiv is set for another year of strong growth, and management forecasts call for a double-digit increase in organic revenue for the full year.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equinix and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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