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Super Micro Computer SMCI and Dell Technologies DELL are key players in the data center liquid-cooling market, driven mainly by coolant architectures needed for AI and high-performance computing. Per a report by MarketsAndMarkets, the data center cooling market is anticipated to witness a CAGR of 12.8% from 2023 to 2030, and both players are positioned well to capitalize on this opportunity.
With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
SMCI’s server and storage revenues are driven by its direct liquid cooling products for data-center applications, which reached a production volume of more than 2000 DLC racks per month.
High volume shipments of liquid-cooled 4U NVIDIA B200 HGX systems and GB200 NVL72 racks developed by SMCI in the third quarter of fiscal 2025 further reflect traction in SMCI’s liquid cooling technology.
Furthermore, SMCI launched DLC-2 technology in May 2025 with features like water and space saving, noise reduction and reduced power consumption to lower the electricity cost by up to 40%, putting it at the forefront of liquid cooling technology.
The company also introduced Direct Liquid-Cooled Building Block Solutions, which integrates rack-scale, plug-and-play architecture with direct liquid cooling to optimize thermal performance, while keeping the data center architecture modular.
However, SMCI is facing some near-term headwinds like delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms. SMCI is also facing margin contraction due to the growing price competition from established competitors like HPE and Dell Technologies in the server space. The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $2.07 per share, indicating a year-over-year decline of 6.3%.
Vertiv also commands a strong thermal management portfolio. It provides Coolant Distribution Units, chillers, rear-door heat exchangers, and immersion cooling systems to optimize performance, power utilization, control, and heat re-use.
The complexity of hybrid air and liquid cooling brought in by AI and HPC workloads presents significant opportunities for the company to innovate its offerings. Vertiv acquired CoolTera in 2023 to deepen its expertise in advanced cooling technology, controls and systems.
Vertiv continues to invest in research and capacity expansion to support the growing AI infrastructure deployment needs. Vertiv’s high-density reference design for NVIDIA’s GB300 NVL72 platform supports up to 142kW per rack through a combination of liquid and air cooling for AI factories. Vertiv has also developed the iGenius Colosseum sovereign AI factory in collaboration with NVIDIA.
These factors are contributing to both top and bottom-line growth of Vertiv. The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $9.52 billion, indicating year-over-year growth of 18.8%. The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $3.56 per share, indicating year-over-year growth of 24.91%.
Shares of SMCI and VRT have gained 65.2% and 6.3%, respectively, in the year-to-date period.
SMCI is trading at a forward 12-month Price to Sales ratio of 1.01X, which is higher than its median of 0.83X. VRT is trading at a forward sales multiple of 4.5X, higher than its median of 4.25X.
Both SMCI and VRT are gaining from the momentum in the cooling technology due to the use case in AI workloads and HPC. However, VRT’s financials make it a stronger pick among the two.
VRT carries a Zacks Rank #2 (Buy) at present, making the stock a stronger pick compared with SMCI, which has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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