|
|
|
|
|||||
|
|
|
The AI/data center sector is probably in a bubble, but it's tough to predict precisely where the market is in its cycle.
Vertiv is a great play on the theme, but investors need to be aware that its valuation may rely on ongoing acceleration of growth in its order book and projected earnings.
Data center infrastructure and Nvidia partner Vertiv (NYSE: VRT) is a Wall Street darling. Of the 24 analysts covering the stock, 17 have "buy" ratings, with four "outperforms" and three "holds."
The AI/data center space is hot right now. Burgeoning demand for power-hungry AI applications is driving investment in data centers, the power solutions that run them, and Vertiv's power, cooling, and IT infrastructure that enable them.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
There is probably some truth to the assertions that a bubble is forming around AI, as history shows us that investors tend to overshoot on the way up and then undershoot on the way down. However, history shows that it's tough to predict which innings of the bubble we are in, and long-term investors make a lot of money by not selling too soon.
Vertiv is a case in point. The company started 2025 with the midpoint of its full-year guidance at $9.2 billion in sales and $1.935 billion in adjusted operating profit. Still, a strengthening in its order book now means management expects $10.2 billion in sales and $2.06 billion in adjusted operating profit. Incidentally, profits would be even higher if not for tariff cost headwinds.
Image source: Getty Images.
If you had sold out based on a $1.935 billion profit, you would have missed out on most of the 68% rise in the stock price this year.
However, valuations still matter, and the stock is now priced at 48 times estimated 2025 free cash flow (FCF) and 41 times Wall Street estimates for next year's FCF. It's probably a good time to take some profits while keeping an eye out for more acceleration in its earnings momentum.
Vertiv is a great way to play the AI/data center spending boom, but the big increase in the stock price has probably made a larger-than-average position in most portfolios, and now might be a good time to adjust position sizes.
Before you buy stock in Vertiv, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vertiv wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $590,287!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,173,807!*
Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 195% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of October 27, 2025
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
| Oct-28 | |
| Oct-28 | |
| Oct-28 | |
| Oct-28 | |
| Oct-28 | |
| Oct-28 | |
| Oct-27 | |
| Oct-27 | |
| Oct-27 | |
| Oct-27 | |
| Oct-27 | |
| Oct-27 | |
| Oct-26 | |
| Oct-26 | |
| Oct-25 |
Join thousands of traders who make more informed decisions with our premium features. Real-time quotes, advanced visualizations, backtesting, and much more.
Learn more about FINVIZ*Elite