Nvidia’s Blackwell GPUs: A Game Changer for Vertiv?

Once known primarily for gaming, Nvidia has transformed into a leading player in artificial intelligence (AI) over the past two years. How did this shift occur?

The key lies in Nvidia’s cutting-edge product: the graphics processing unit (GPU). These GPUs have become essential for generating AI, helping Nvidia build a business worth tens of billions of dollars.

Later this year, Nvidia plans to launch its most powerful GPU architecture yet — called Blackwell. While this launch is expected to bolster Nvidia’s growth, another opportunity may lie with data center company Vertiv (NYSE: VRT), which could attract AI investors.

The Potential Scale of Blackwell

Estimating the scale of Blackwell’s business impact for Nvidia is challenging. However, recent analyses suggest a promising outcome. For example, Morgan Stanley recently highlighted that Blackwell could generate $10 billion in revenue during Nvidia’s fourth quarter.

An analyst from Morgan Stanley also reported that Blackwell GPUs are already sold out for the upcoming year. It appears Nvidia CEO Jensen Huang’s remark about “insane” demand for Blackwell may be accurate.

Image source: Getty Images.

How Vertiv Stands to Gain

GPUs excel at processing complex programs and algorithms essential for training machine learning applications and large language models (LLMs). This process is more intricate than simply running software on a personal computer.

Companies like Super Micro Computer and Dell Technologies provide the physical infrastructure to house GPUs. Often clustered in server racks within data centers, GPUs produce significant heat as they operate continuously. Consequently, data centers require substantial energy and face overheating risks.

Currently, data centers depend on air conditioning units, power generators, and fans to manage heat. As spending on AI infrastructure increases, there is a pressing need for more efficient heat management solutions. This is where Vertiv comes in.

Vertiv specializes in liquid cooling, an innovative energy management approach for data centers. According to research firm TrendForce, liquid cooling is anticipated to double its presence in data centers, increasing from roughly 10% today to 20% by 2025.

The surge in liquid cooling adoption is primarily driven by Nvidia and the launch of Blackwell.

Is Vertiv Stock a Good Investment Now?

After a 130% increase in its stock price this year, Vertiv is trading near its all-time high, around $110.

Investor sentiment towards Vertiv appears optimistic, reflected in its 12-month forward price-to-earnings (P/E) ratio of 31.7, significantly higher than the average forward P/E of the S&P 500, which sits around 24. This premium might suggest that investors expect better returns from Vertiv compared to the broader market.

While some may question whether it’s too late to invest, Vertiv presents a compelling option as a potential beneficiary of Blackwell’s success. As Nvidia reportedly faces a one-year backlog in GPU orders, the demand for its products likely indicates future expansion in manufacturing relations.

This scenario implies Blackwell could act as a long-term tailwind for the data center market, particularly benefiting companies like Vertiv specializing in liquid cooling. As businesses invest in GPU technology and enhance their data center needs, Vertiv seems well-positioned to capitalize on this demand.

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Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.