This Stock Perfected the Art of Selling Shovels in an AI Gold Rush

Author

Noah Zelvis
December 13, 2025

You do not need to understand every wiring diagram in an AI data center to follow Vertiv. Think in three buckets instead.

First, does the AI build-out keep demanding more power, cooling, and racks than the grid is ready for.

Second, is the company turning that demand into growing cash rather than just pretty slideware. Third, how far has the share price sprinted ahead of those numbers.

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What Just Happened

Vertiv Holdings (NYSE: VRT) has been one of the loudest picks-and-shovels winners of the AI build-out.

The stock is up roughly 50 percent this year and more than ten-bagged over the last few, putting it in the hall-of-fame section of the chart.

Recently, though, the momentum hit a speed bump.

A downgrade from Wolfe Research to Peer Perform and disappointment over missing the latest S&P 500 index addition cycle knocked the shares off their highs.

You can see that in the recent slide from the high-190s toward the 170s, plus some choppy trading as fast-money types decide whether to stick around.

Under the hood, the business print looks very different from the wobbly share price.

Vertiv just posted another big quarter with double-digit revenue growth, margins in the low 20s, and free cash flow that actually shows up in the bank account.

The tension here is not is the business okay but how much is that business worth after a 1,200 percent run.

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The Strategy In Plain English

Vertiv sells the unglamorous stuff that makes giant AI clusters possible – power distribution, backup systems, racks, and the cooling kit that stops hundreds of GPUs from cooking themselves.

When a hyperscaler decides to stand up an AI region, someone has to deliver the boxes, pipes, and pumps. Vertiv wants to be first on that call sheet.

The playbook is simple to describe and hard to execute. Build standardised, modular power-and-cooling systems that can be rolled out quickly across different sites.

Tie those designs directly to what Nvidia, Intel and others are doing at the rack level. Then ride each wave of AI data-center capex with higher-density gear and better margins.

In other words, Vertiv is trying to move from we sell gear to we are your AI-ready infrastructure partner,  which is why investors have treated it less like a sleepy industrial name and more like an AI-levered growth stock.

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Why The Stock Just Wobbled

If the story is so clean, why the sudden altitude sickness.

  • Valuation got stretched. A P/E north of 60 and big multiple expansion made even bullish analysts nervous after the run. Wolfe’s downgrade was basically a polite way of saying this has gone far very fast.

  • Hopes were high for S&P 500 inclusion. When Vertiv did not make the latest cut, a nice mechanical buyer base (index funds and closet indexers) did not show up, and some event-driven money headed for the exit.

  • AI sentiment cooled a touch. When traders started questioning whether parts of the AI trade had run ahead of itself, anything tightly tied to AI infrastructure felt the chill, Vertiv included.

None of these points say the business broke. They say the expectations bar moved from high to very high, which is exactly where volatility tends to live.

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The Good Stuff You Can Actually Point To

  • Real demand, not a science project
    Revenue is growing fast, orders are even stronger, and the backlog sits in the multi-billion range. That tells you customers are not just kicking the tires; they are signing purchase orders.

  • Margins that look more software than factory
    Adjusted operating margins around 20 percent and EPS growing much faster than sales show that Vertiv is not simply shoving more metal out the door; it is doing it with pricing power and efficiency.

  • Right place in the stack
    AI clusters are hitting 50–100 kilowatts per rack and beyond. That calls for high-end power and liquid-cooling solutions, where Vertiv already has products live and partnerships with the key chipmakers.

  • Balance sheet that is not on fire
    Despite the growth investments, leverage is modest and free cash flow is healthy. Vertiv even nudged its tiny dividend higher, which is more of a confidence signal than a serious yield but still tells you management is not panicking about cash.

The Rub You Should Respect

  • Hot multiple, thin margin for error
    A P/E in the high-60s and rich cash-flow multiples mean the market is already paying up for years of continued growth. If AI capex slows, even a little, the multiple can compress while the business is still doing fine.

  • Cyclical customers, concentrated budgets
    A handful of hyperscalers and big AI players drive much of the demand. If even one of them delays a campus build or shifts designs in-house, Vertiv’s order book will feel it.

  • Competition is not asleep
    Names like Schneider, Eaton and Siemens all want a slice of AI power and cooling. Vertiv’s head start is real, but so is the competitive response when billions of dollars are up for grabs.

  • AI hype risk
    Vertiv’s narrative is fully wired into the AI build-out. If the market decides the AI theme needs a breather, picks and shovels can get hit alongside the miners, even if their fundamentals still look solid.

What This Sets Up Over The Next 3–4 Quarters

From here, the story is less about discovering Vertiv and more about proving it deserves the premium. A constructive path looks like this.

  • Revenue keeps growing in the high teens to low twenties as AI and high-density data-center builds continue.

  • Backlog stays healthy and does not stall, telling you new orders are replacing what ships out.

  • Margins remain around 20 percent or better, showing that higher-complexity products and scale are offsetting any pricing pressure.

  • Cash generation tracks earnings reasonably well instead of getting swallowed by working capital and capex.

Hit those marks and today’s pullback looks like a reset inside a longer uptrend rather than the top.

Miss them and the market will not give a high-60s multiple much benefit of the doubt.

What I’m Watching

  • Order growth versus revenue growth – orders running ahead of sales says the runway is still extending, not shortening.

  • Backlog quality – how much of the backlog is tied explicitly to AI and high-density builds versus older, lower-margin projects.

  • Customer mix – more logos and less dependence on a tiny handful of whales would de-risk the revenue stream.

  • Margin trend – any slippage from the low-20s as competition heats up or input costs bite would be an early warning.

  • Capital allocation – sensible capex and targeted deals that deepen the AI infrastructure moat, not empire-building for its own sake.

How I’d Frame A Position

This is no longer the overlooked turnaround story from a few years ago; it is a well-known, volatile leader in an AI-linked niche.

That means position sizing and timing matter as much as the thesis.

  • Starter exposure on red days rather than chasing green ones, because swings of 5 percent in either direction are normal here.

  • Add only if the company strings together a few quarters of strong orders, steady margins, and clean cash conversion – proof, not promises.

  • Be ready to trim into sharp rallies if the stock overshoots analyst targets again without a fresh step-up in fundamentals.

The Bottom Line

Vertiv is not the AI model in the flashy demo; it is the plumbing that keeps that model powered and cooled.

The business case rides on a simple idea, that AI data-center demand stays strong, and Vertiv captures a healthy, profitable slice of the power-and-cooling budget.

On recent numbers, that plan is working.

The catch is that the share price already tells a heroic story, with one of the biggest rerates in the market over the last few years and a multiple that assumes the next chapter goes almost as well as the last.

If you believe the AI infrastructure cycle still has a long runway and are comfortable with volatility, Vertiv can be a high-beta way to express that view – just recognize you are buying a leader at leader pricing, not a bargain in the clearance bin.

Action Recap

✅ Starter – Consider a small, long-term position if you want leveraged exposure to AI data-center build-outs.
✅ Add On Proof – Only if orders keep outpacing sales, margins hold near 20 percent, and cash flow tracks the earnings story.
⚠️ Trim On Trouble – If backlog growth stalls, margin trends slip, or AI-capex commentary from big customers turns cautious.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.

Best Regards,
—Noah Zelvis
Tech Stock Insider