Forget Nvidia: 1 Another Data Center Stock To Buy Handing Out Right Now That Virtually No One Is Talking About

When it comes to companies that are involved in data centers, I would bet that Nvidia is the first that comes to my mind. While Nvidia has a huge presence for data center services, there are plenty of other competitors worth watching.

Below, we’ve detailed some of the challenges facing the data center industry and some possible solutions. Plus, I’ll discuss my top pick outside of Nvidia and explain why this company, Vertiv Holdings (VRT 0.37%)should be on your radar.

Data centers consume a lot of energy

Data centers are similar to warehouses. But instead of being oversized storage units, data centers house critical pieces of IT infrastructure, such as racks of servers that hold chipsets known as graphics processing units (GPUs).

This type of networking equipment is essential for powering all types of artificial intelligence (AI) applications. Although AI can bring efficiency to sophisticated projects in cloud computing or database management, there are some trade-offs. One of the biggest opportunity costs of high-performance computing is power consumption.

Conformable Barclaysdata centers account for 3.5 percent of U.S. electricity consumption. In addition, Barclays predicts that this figure will increase to 5.5 percent by 2027 and 9 percent by 2030.

Taking this on a more global scale, Goldman Sachs estimates that data centers will account for up to 4% of global energy consumption by the end of the decade — up from 2% today.

The overarching theme here is that as demand for AI services continues to grow, these secular tailwinds will influence the energy market in general. As data center energy consumption increases, so do the costs of maintaining this infrastructure.

Image source: Getty Images.

Liquid cooling could be a useful solution

Sometimes when I have too many tabs open on my laptop or have a large program running in the background, my computer will start to heat up. A similar dynamic is happening inside data centers. As network equipment runs around the clock in data centers, it’s only natural that servers start to heat up.

To mitigate this, data centers are often equipped with fans, air conditioning units and generators. But as we explored above, these methods of keeping the temperature inside data centers under control are expensive and likely to increase in the future.

An alternative solution to today’s current power protocols for managing data centers is liquid cooling. Water and other fluids have superior thermal conductivity and heat transfer characteristics compared to traditional fans and AC systems. In turn, liquid cooling could be a more efficient method of energy management for data centers.

This company is a leader in liquid cooling for data centers

Vertiv Holdings is a leader in liquid cooling technology. Believe it or not, three years ago I published my first article for The Motley Fool and it was about Vertiv.

At the time, the stock was trading at about $27 per share. Today, it’s up more than 200% to around $85 per share.

At the time, my perspective on Vertiv was that the company would see increased demand for its services due to the growing need for digital infrastructure applications in the Internet of Things (IoT) and cloud computing. Even though this was a correct thesis, I didn’t know that a year after my article published in November 2021, the world would be introduced to ChatGPT and AI would emerge as the next frontier in technology.

To me, the metrics in the chart below illustrate a new surge for Vertiv that should continue for many years as the AI ​​revolution takes shape. In the company’s second quarter earnings report, even management high its guidance for sales, operating profit and free cash flow.

VRT Revenue data (quarterly) by YCharts

With mission-critical data infrastructure even more important now than it was a few years ago thanks to artificial intelligence, it’s no surprise to see Vertiv emerge as a beneficiary. As energy-efficient solutions become another focal point for companies investing significant capital expenditures (capex) in data center infrastructure, I see Vertiv in a stronger position today than it was three years ago. Vertiv is a compelling buy-and-hold stock for long-term investors, and now is a great opportunity to get shares.