By Mackenzie Tatananni

Vertiv Holdings faces near-term challenges as sluggish buying of data-center equipment hurts demand for its cooling systems, TD Cowen and Barclays analysts argued Wednesday.

TD Cowen analysts led by Michael Elias pointed to a slowdown in orders for data-center equipment. The shift began in January and stemmed from hyperscalers like Microsoft and Alphabet-owned Google redesigning their data centers to cram more power-hungry equipment into each server rack, they said.

Neither the hyperscalers themselves nor the third-party data-center operators supporting them can place orders until the new designs are finished, the analysts said. The plans will determine which equipment is needed.

Vertiv didn't immediately respond to a request for comment .

TD Cowen's checks with suppliers at Nvidia GTC and other conferences point to delayed decisions to purchase data-center equipment. Orders to lease hyperscale computing capacity have also been pushed out by one or two quarters.

An additional challenge is that third-party data-center operators have stockpiled equipment to speed up the process of bringing capacity to market. The result is a near-term "air pocket in equipment ordering" that will likely hurt order volumes at Vertiv in the first half of 2025.

TD Cowen rates Vertiv stock at Buy with a $139 price target. Shares plunged 12% to $80.95 on Wednesday, implying a potential gain of nearly 72% to TD Cowen's target. The S&P 500 and tech-heavy Nasdaq Composite were down 1.2% and 2.1%, respectively.

Barclays analysts led by Julian Mitchell reiterated an Equal Weight rating on Vertiv shares and lowered their price target to $100 from $110, pointing to the same headwinds as TD Cowen.

The Barclays team said that Vertiv's first-quarter orders, when taken in conjunction with the order rate of recent quarters, don't support investors' hopes for high-teens growth in 2026.

Broader commentary on artificial intelligence and capital spending at hyperscalers "is likely to become more muted amidst uncertain demand and very large capacity/supply increases," the analysts wrote.

Barclays cited recent comments by Alibaba Chairman Joe Tsai about the emergence of an AI capex bubble. Speaking at the HSBC Global Investment Summit on Tuesday, Tsai argued that the construction of data-center capacity may outpace initial demand for AI.

The firm calculated a price-to-earnings ratio of 18 times estimates for Vertiv's 2026 earnings per share. This "does not offer much room for error," the analysts said, given that many names in the sector no longer look particularly costly compared with the past 12 months.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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March 26, 2025 15:28 ET (19:28 GMT)

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