Vertiv Holdings (VRT) stock fell 6.2% on Tuesday after tech giant Microsoft (MSFT) announced that it had successfully tested a new microfluidic cooling system for data center chips, presenting a potential competitive threat to the artificial intelligence (AI) infrastructure company. However, VRT stock recovered by 1.5% in Wednesday’s pre-market trading.
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Vertiv Faces Increased Competitive Pressures
Microsoft stated that it has successfully tested a new cooling system that removes heat up to three times more effectively than cold plates, an advanced cooling technology commonly used currently. The company added that its cooling system uses microfluidics, an approach that brings liquid coolant directly inside the chip.
Moreover, Microsoft’s cooling system leverages AI to identify the unique heat signatures on a chip and direct the coolant with more precision. The company highlighted that researchers expect microfluidics to boost efficiency and improve sustainability for next-generation AI chips.
The news dragged down VRT stock on concerns over the impact on demand for its cooling technologies used in data centers. It is worth noting that VRT stock plunged on July 10, when Amazon (AMZN) announced the launch of its own cooling system. However, some analysts felt that the selloff in VRT stock was overdone, given the company’s competitive advantages, including a market-leading portfolio in power and thermal management, as well as strong relationships with chipmakers.
Is VRT a Good Stock to Buy?
Given the robust demand for cooling solutions amid rapidly growing AI data centers, Wall Street has a Strong Buy consensus rating on Vertiv Holdings stock based on 15 Buys, two Holds, and one Sell recommendation. The average VRT stock price target of $152.38 indicates 6.9% upside potential from current levels. VRT stock has risen more than 25% year-to-date.
