AI is fueling the demand for power, but can your data center keep cool? 🌡️

As the artificial intelligence (AI) boom continues to gain momentum, the demand for more powerful processors is escalating. This surge in processing power, however, comes with an accompanying challenge: the need to effectively manage the heat generated by these increasingly powerful systems. For data centers, which are the backbone of AI and other digital operations, overheating is a critical issue that can lead to equipment failure and costly downtime. As a result, technology companies are actively exploring advanced cooling methods to maintain optimal operating conditions.

One solution that is gaining traction is liquid cooling. Traditionally, data centers have relied on large aisles and sophisticated air circulation systems to keep equipment cool. These setups allow cooled air to move freely around servers, mitigating the risk of overheating. However, as performance demands rise, the limitations of air cooling become more apparent. Liquid cooling offers a promising alternative by potentially enabling data centers to pack more servers into their existing spaces without compromising on temperature control.

Vertiv’s Leadership in Liquid Cooling Solutions

Vertiv, a leading provider of digital infrastructure solutions, is at the forefront of the shift towards liquid cooling in data centers. The company’s CEO, Giordano Albertazzi, highlighted in a CNBC interview in June that the adoption of liquid cooling technology could see significant acceleration in 2024. Vertiv’s offerings in this space are comprehensive, including both hybrid air- and liquid-cooling systems as well as fully liquid-cooled data centers. This positions Vertiv as a key player in the evolving landscape of data center cooling.

Vertiv’s expertise extends across various aspects of data center cooling, from indoor server rack cooling to outdoor complex cooling systems. The company’s advanced solutions are designed to meet the growing needs of data centers as they grapple with the increased heat generated by AI and other high-performance computing tasks. As AI deployment expands and digital infrastructure continues to grow, the demand for Vertiv’s cooling systems has surged, further solidifying the company’s position in the market.

Strong Demand Drives Vertiv’s Record Backlog

The rise of AI and the expansion of digital infrastructure have not only increased the demand for cooling solutions but have also driven significant growth for Vertiv. The company currently boasts a record backlog of $6.3 billion, a clear indication of the strong market demand for its products and services. This backlog is particularly fueled by the surge in data center needs, as organizations across various industries invest heavily in infrastructure to support AI and other digital innovations.

VRT Technical Analysis (daily)

The daily chart of Vertiv Holdings Inc. (VRT) displays a mix of signals, suggesting potential short-term recovery, but with caution due to mixed indicators.

Trend Analysis:
The stock has experienced a recent downtrend, with the price falling from its peak near $130 earlier this year to its current level around $78. The price is currently trading below both the 50-day (around $85) and 200-day (around $74) moving averages. The fact that the 50-day moving average is still above the 200-day suggests that while there has been a recent correction, the longer-term uptrend could still be intact, although this is starting to weaken.

Support and Resistance Levels:

• Support: Strong support is evident around $74, near the 200-day moving average, where the stock recently bounced. This level will be crucial to monitor; if the price falls below this, it could signal further downside.
• Resistance: Resistance is around $85, where the 50-day moving average is acting as a ceiling. A break above this level could signal a potential reversal to the upside.

Volume:
Recent volume spikes suggest increased interest in the stock, particularly during the recent dip to $74, indicating some buying pressure. However, the volume has not been significantly above average, suggesting cautious trading behavior.

Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI):
The RSI is at 49.09, indicating neutral momentum. The RSI is hovering around the mid-point, suggesting neither overbought nor oversold conditions. However, it’s slightly tilting upwards, which could be a sign of increasing bullish momentum.

On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV):
The OBV has been relatively flat, indicating that there is no strong accumulation or distribution occurring. This neutral stance aligns with the indecision in the price action.

Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More:
The Stochastic RSI is at 0.717, which is relatively high but not yet in the overbought territory. This suggests that there is some upward momentum, but it is not yet at an extreme level.

Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More:
The Chaikin Oscillator shows a positive value, indicating that the accumulation has been stronger than distribution recently. This could be a bullish sign if it continues, but the increase is relatively modest.

MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More:
The MACD line has recently crossed above the signal line, with the MACD histogram turning positive, which is a bullish signal. However, the overall MACD value remains slightly negative, reflecting the recent downtrend.

Time-Frame Signals:

• 3-Month: Hold. The stock is at a critical juncture. A break above $85 would signal a potential buy, but a failure to hold above $74 could lead to further declines.
• 6-Month: Hold. The indicators are mixed, with potential for both recovery and further decline depending on upcoming price action.
• 12-Month: Buy. Assuming the stock holds above the 200-day moving average, the long-term uptrend could resume, especially if broader market conditions improve.

Future Trend Indication: The chart suggests a cautious outlook. While there are early signs of recovery, with the MACD turning positive and the stock holding above its 200-day moving average, the presence of strong resistance at $85 and mixed volume signals suggest the need for further confirmation. The trend could potentially reverse if the stock breaks above the $85 resistance, but failure to maintain the $74 support could result in further downside.

VRT Technical Analysis (weekly)

The weekly chart of Vertiv Holdings Inc. (VRT) provides a broader perspective on the stock’s performance, highlighting its significant rise over the past year and the recent correction.

Trend Analysis:
The stock experienced a strong uptrend from its low near $12.04 in October 2022, reaching a high around $130 in 2024. However, it has recently corrected and is now trading around $78.06. The price is currently between the 40-week exponential moving average (around $77.30) and the 150-week exponential moving average (around $45.85). The fact that the price is still above these moving averages indicates that the long-term uptrend may still be intact, despite the recent pullback.

Support and Resistance Levels:

• Support: The 61.8% Fibonacci retracementFibonacci retracement is a fundamental tool in the arsenal of technical analysts and traders. Rooted in the mathematical principles of the Fibonacci sequence, this technique is wid... More level at $49.19 is a key support level. If the stock continues to decline, this level will be critical to monitor. Additional support is near the 150-week moving average at $45.85.
• Resistance: The 23.6% Fibonacci retracement level at $86.33 acts as immediate resistance. A break above this level could see the stock attempt to recover further. The next significant resistance would be around the $100 mark, where the price previously peaked.

Volume:
Volume has been relatively stable with spikes during key movements, particularly during the run-up earlier in the year. However, recent volume has been declining, which could indicate waning interest or indecision among traders.

On Balance Volume (OBV):
The OBV has been trending downward since mid-2024, reflecting distribution as the price corrects. This decline in OBV suggests that the upward momentum has weakened, and there could be further downside if this trend continues.

Time-Frame Signals:

• 1-Year: Hold. The stock is in a critical phase. While the long-term uptrend remains intact, the recent correction could either be a consolidation before a further rise or the start of a deeper pullback. It is advisable to wait for more clarity.
• 2-Year: Buy. If the stock holds above the 61.8% Fibonacci level and the long-term moving averages, there is potential for a recovery in the coming years, assuming broader market conditions are favorable.
• 3-Year: Buy. The longer-term trend still points upwards, with the stock potentially resuming its uptrend once the current correction phase is over.

Future Trend Indication:
The chart suggests that while the stock is currently in a corrective phase, the long-term trend remains upward, provided it holds above key support levels like $49.19. A break above $86.33 could confirm a resumption of the uptrend. However, continued weakness in OBV and declining volume are cautionary signs that could indicate further consolidation or a potential deeper pullback.

Past performance is not an indication of future results, and this article should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Vertiv’s ability to meet the cooling needs of modern data centers makes it an essential partner for companies looking to maintain high levels of performance while managing the risks associated with overheating. As the demand for AI and digital infrastructure continues to rise, Vertiv’s role in the industry is likely to become even more critical, with its solutions helping to ensure that data centers can operate efficiently and effectively in the face of growing challenges.

In conclusion, the AI boom is driving a significant increase in the need for advanced cooling solutions in data centers, with liquid cooling emerging as a key technology. Vertiv’s leadership in this area, combined with its strong market demand, positions the company well to capitalize on the growing needs of the digital infrastructure sector. As we move further into the AI-driven era, Vertiv’s contributions to data center cooling will play a crucial role in supporting the continued expansion of this vital industry.