Could Vertiv Be the Next Pick-and-Shovel Play for the AI Infrastructure Boom?

Artificial intelligence (AI) infrastructure is booming, and with it comes a surging demand for power and equipment solutions to support these next-generation data centers. AI server racks are becoming so powerful that, according to the International Energy Agency, a single rack in an advanced data center could have a peak power demand equivalent to 65 households by 2027.

With hyperscalers spending up to $700 billion in capital expenditures on the data center build-out this year, investing in "pick-and-shovel" stocks, or companies that provide the essential equipment or services for these data centers, becomes a compelling opportunity.

One such company that investors should have on their radars is Vertiv Holdings (NYSE: VRT), which provides power and cooling infrastructure. As AI reshapes the physical demands of computing, Vertiv's role in keeping data centers operational makes it an intriguing stock for investors looking to capitalize on the AI spending boom.

Vertiv is enjoying tailwinds from incredibly strong AI data center investments

Data centers and their powerful server racks consume more energy than ever, making power and thermal management systems essential to safely distributing electricity, removing excess heat, and preventing costly downtime. As AI workloads feature higher rack densities, equipment such as UPS systems, switchgear, and liquid-cooling solutions, which Vertiv specializes in, are becoming critical components.

Vertiv's power and thermal management systems ensure continuous operation with maximum efficiency and uptime at AI data centers. With modern AI training and inference clusters built around advanced GPUs, Vertiv is seeing a drastic pickup in demand for its products.

In the first quarter, Vertiv reported net sales of $2.65 billion, up 30% year over year. This growth was largely driven by its Americas segment, which posted 44% organic growth on the back of AI data center demand. Meanwhile, its operating margin expanded to 20.8%, and the company updated its full-year adjusted operating profit guidance to $3.2 billion.

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Vertiv is seeing incredibly robust demand, as evidenced by its $15 billion backlog. This massive backlog provides visibility into Vertiv's future revenue. The company noted that customers are increasingly placing orders in advance and seeking delivery windows of 12 to 16 months, providing it with visibility into earnings through 2028.

Because customers are purchasing fully integrated systems optimized for specific silicon footprints (such as Nvidia's next-generation platforms), double-ordering is unlikely to be an issue, according to Vertiv CEO Gio Albertazzi.

The future is bright for Vertiv

Rack densities (the amount of electrical power consumed) have increased from 140 kilowatts (kW) to 300 kW and will eventually reach 600 kW, drastically increasing the cooling and power needs per rack. As a result, Vertiv expanded its total addressable market from $62 billion to $75 billion, and is expanding its footprint and developing pre-engineering modular solutions to meet this growing demand.

Vertiv stock isn't cheap, priced at around 73 times last year's earnings, but investors are paying a premium for growth for good reason. Analysts covering the stock project that the company's earnings per share could grow 57% this year and 36% in 2027, implying a forward valuation of 34 times 2027 earnings. For investors looking to capitalize on the booming hyperscaler investments in data centers, Vertiv is a solid pick-and-shovel stock to scoop up today.

Courtney Carlsen has positions in Nvidia and Vertiv. The Motley Fool has positions in and recommends Nvidia and Vertiv. The Motley Fool has a disclosure policy.