Better AI Infrastructure Stock: Vertiv vs. Eaton

The amount of capital being invested by artificial intelligence (AI) hyperscalers is mind-blowing. During recent earnings calls, Microsoft, Meta Platforms, Amazon, and Alphabet revealed plans to spend $732.5 billion on AI capital expenditures (capex) in 2026. Forecasts from Goldman Sachs and JPMorgan Chase project AI capex will top $1 trillion in 2027, with trillions more pouring in in the coming years.

This huge capex spending has made Vertiv (NYSE: VRT) and Eaton (NYSE: ETN) attractive pick-and-shovel plays for the hardware boom. While both companies supply essential power and cooling systems, they appeal to different investor profiles.

Image source: The Motley Fool.

How the AI infrastructure boom benefits Vertiv and Eaton

Vertiv specializes in infrastructure crucial for modern data centers. This includes high-density power management, chillers, and liquid cooling. As modern AI chips push rack densities to extreme levels, Vertiv is pursuing modular solutions such as Vertiv OneCore and partnering with Nvidia to design next-generation 800V DC power architectures.

In addition, Vertiv is addressing another major concern surrounding data centers: cooling solutions and the water they use. The company manufactures closed-loop cooling systems that use almost no water during operation. Its PurgeRite offering is a unique fluid management service that treats and recycles water, reducing water usage by up to 90%.

While Vertiv is a pure-play AI infrastructure stock, Eaton is a legacy electrical supplier that has pivoted to become an integrated chip-to-grid infrastructure provider. Eaton provides a comprehensive suite containing switchgear, transformers, UPS, and liquid cooling. It also made a big splash with its $9.5 billion acquisition of Boyd Thermal, which provides liquid cooling and works with chipmakers like Nvidia and AMD to design cooling architectures optimized for newer products.

Eaton is also taking steps to pivot away from more legacy business to focus on higher-growth opportunities. The company is shedding some of its lower-margin, cyclical businesses, such as its Mobility Group with Dana Incorporated, which it is spinning off to create a separate company. Eaton will receive a $1.1 billion cash distribution before completion. The deal is expected to close in early 2027.

Both companies are seeing strong sales performance

Both companies are seeing strong growth driven by the AI infrastructure boom. In the second quarter, Vertiv's net sales grew 24% year over year to $3.27 billion. Alongside this, management raised net sales projections for the year to $14 billion, representing a 37% increase from last year. Chief Executive Officer Giordano Albertazzi says its global sales pipeline is accelerating, with faster sales cycles across hyperscalers, colocation providers, and neoclouds.

For Eaton, the second quarter brought record revenue of $8.5 billion, representing 21% year-over-year growth. The company saw stellar growth in its Electrical Americas segment, which posted 18% organic sales growth. This came as orders for the data center market surged 85%.

In addition, Eaton also saw solid growth from its aerospace segment, which posted record quarterly sales. This was driven by strong demand from original equipment manufacturers (OEMs) and the aftermarket. It also saw a strong rebound in orders across customer types, including utility, industrial, and residential, which represent business diversified apart from data centers.

Which AI infrastructure stock is right for you?

For investors weighing Vertiv and Eaton, there are a few considerations. Vertiv trades at a slightly higher valuation, at about 40 times forward earnings, compared to Eaton, which trades at 33 times forward earnings.

The valuation gap comes as analysts project a faster growth rate for Vertiv relative to Eaton. During the three years ending 2028, analysts forecast Vertiv's earnings per share (EPS) to grow at about 40% compounded annually, compared to Eaton, which analysts project to grow about 15.5% annually.

For conservative investors who want to capitalize on the AI boom while diversifying across the industrial sector, including aerospace and utilities, Eaton is the stock to choose. However, if you want to be more aggressive and want a pure pick-and-shovel stock to play the AI infrastructure boom with more forecast growth ahead, Vertiv is the stock to go with.

JPMorgan Chase is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in Advanced Micro Devices, Alphabet, Eaton Plc, Goldman Sachs Group, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, and Vertiv. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Eaton Plc, Goldman Sachs Group, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, and Vertiv. The Motley Fool has a disclosure policy.