Comments from Nvidia (NVDA) at CES about next-generation chip cooling are prompting investors to reassess which companies stand to gain, or lose, as data-center infrastructure evolves, according to a note from UBS.
In a report published Tuesday, UBS analyst Amit Mehrotra said Nvidia’s (NVDA) description of its forthcoming Vera Rubin platform suggests that some high-performance AI systems could operate without traditional mechanical chillers in certain climates, altering the economics of heat rejection in data centers.
Nvidia (NVDA) has said its newest chips run so hot that they can be cooled with much warmer liquid, roughly 110 to 115 degrees Fahrenheit, without sacrificing performance. That warmer water can then be cooled using so-called “free cooling,” which relies on outdoor ambient conditions rather than energy-intensive mechanical chillers.
“The bottom line is this new technology impacts mostly the heat-rejection method,” Mehrotra wrote, emphasizing that the shift is about how heat is expelled rather than eliminating cooling infrastructure altogether.
Winners: cooling towers and dry coolers
UBS said the development is broadly positive for makers of cooling towers and dry coolers, which can reject heat without compressors. Mehrotra highlighted Vertiv (VRT) as a potential beneficiary, noting that its DX Thermal portfolio has a strong position in dry-cooler systems.
The analyst also sees “neutral to positive” implications for Modine (MOD), whose air-cooled chillers can incorporate free-cooling capabilities that reduce reliance on compressors when outdoor conditions allow.
Chilllers not going away
Despite headlines suggesting Nvidia’s (NVDA) chips could make chillers obsolete, UBS pushed back on that interpretation. Mehrotra said mechanical chillers will remain a core part of data-center design for the foreseeable future.
Most data centers operate hybrid environments, where only a portion of racks are dedicated to AI workloads, while the broader facility still requires traditional air cooling. In addition, most installed chips continue to require either air cooling or much colder liquid, both of which depend on water-cooled mechanical chillers.
Geography also matters. UBS noted that Nvidia’s (NVDA) warmer-water cooling concept is far less effective in hot climates such as Texas and Arizona, where outdoor temperatures can approach or exceed liquid-loop temperatures, limiting the viability of free cooling.
Mixed effect on diversified HVAC players
For diversified HVAC and industrial players such as Trane Technologies (TT) and Johnson Controls (JCI), UBS sees “neutral to modestly negative” implications from the Nvidia-driven shift. Still, Mehrotra stressed that both companies are expected to deliver meaningful growth in coming years, with much of Johnson Controls’ improvement driven by company-specific margin initiatives rather than data-center exposure alone.
Overall, UBS framed Nvidia’s CES comments as evolutionary rather than disruptive for cooling equipment makers, reshuffling demand across technologies rather than eliminating it. As Mehrotra put it, chillers “will still be very much part of the data center infrastructure ecosystem,” even as free-cooling solutions take on a larger role in select applications and climates.