Oracle Has Committed Hundreds of Billions to AI Data Centers. These 2 Industrial Stocks Will Power Them.
Key Points
Vertiv's sales jumped 24% as it expanded its manufacturing and liquid-cooling capacity to serve AI data centers.
Caterpillar is supplying gas generators and turbines to power data centers at a faster pace than new grid connections can keep up with.
The two are now collaborating directly, combining power generation with distribution and cooling for faster AI deployments.
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Oracle (NYSE: ORCL) is going all-in on artificial intelligence (AI), investing billions in data centers to expand its Oracle Cloud Infrastructure business and provide the computing power needed to train and run AI models.
That is great news for Vertiv Holdings (NYSE: VRT) and Caterpillar (NYSE: CAT), two industrial stocks that could help power this huge building boom.
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Vertiv powers and cools the AI data center boom
AI makes data centers much more power-hungry and harder to cool, and Vertiv sells the infrastructure needed to solve both problems. Demand is already fueling a major order cycle for the company.
In the second quarter, it reported net sales of around $3.27 billion, up 24% year over year. To meet growing demand from data centers, Vertiv announced four new or expanding factories to increase capacity for power management and infrastructure products. The company said the investments will support the continued expansion of AI factories.
Also, as AI chips become more powerful, cooling is becoming one of the biggest physical challenges. To address it, Vertiv announced a $50 million investment in Ohio to expand production of liquid-cooling and chilled-water systems. These are designed for high-density computing, and the Ironton factory expansion in particular is expected to be operational in the second quarter of 2027.
Management has also acquired companies like PurgeRite to further strengthen its fluid management services.
So, while Oracle supplies the cloud capacity, Vertiv provides much of the infrastructure that gets electricity to the AI chips and removes the heat they generate. And another player is helping hyperscalers like Oracle secure huge amounts of power.
Caterpillar powers data centers when the grid falls short
Grid connections can take years to complete, but hyperscalers want new computing capacity as soon as possible. To address this problem, Caterpillar supplies natural gas generators, gas turbines, and other power equipment that can provide electricity directly to data centers.
Management says that data center demand is a key driver for its power generation business, with the company expecting continued strength as demand grows. Building new grid connections can take too long, so off-grid solutions are a faster way to power data centers.
Caterpillar is already putting more capacity behind this. For example, it announced a $725 million expansion of its large-engine manufacturing footprint, citing rising energy demand and the growing opportunity around AI and data centers.
It is also moving beyond backup generators toward providing on-site power for data centers. Caterpillar entered into an agreement with Joule Capital Partners to power a high-performance computing campus in Utah, with 4 gigawatts of total energy supported by a fleet of Caterpillar natural gas generators.
And Caterpillar and Vertiv announced a collaboration combining the former's power generation equipment with the latter's power distribution and cooling systems. The goal is to create integrated solutions that help data centers be deployed faster and be powered up sooner. So, as Oracle builds out its data centers, Caterpillar can help provide the on-site power to get them up and running before grid connections are available.
With many investors still focused on chips and memory, it's easy to overlook other opportunities such as these two that could offer greater upside.
Why AI requires more than just chips
The data center boom creates opportunities beyond chipmakers, with insatiable demand for power, cooling, and other infrastructure, and Vertiv and Caterpillar are stepping up to meet it. As hyperscalers build more data centers, Vertiv provides the power management and cooling systems, while Caterpillar delivers on-site power generation for applications where the grid can't keep up.
With both companies supporting this expansion, these two stocks could be some of the best ways for investors to bet on Oracle's hundreds of billions in data center commitments.
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Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Caterpillar, Oracle, and Vertiv. The Motley Fool has a disclosure policy.
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