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Shares of Vertiv Holdings (NYSE:VRT) tumbled as much as 14% on Thursday, diverging sharply from the broader industrial sector (XLI), after media reports suggested that Amazon (NASDAQ:AMZN) had launched a competing liquid cooling solution for AI servers.
However, UBS analyst Amit Mehrotra urged investors to look past the headlines, defending Vertiv (NYSE:VRT) with a continued Buy rating and asserting that the selloff likely was an overreaction.
In a client note on July 11, Mehrotra acknowledged that liquid cooling remains a relatively small part of Vertiv’s (VRT) current business, but it represents an outsized portion of the company’s future growth opportunity. Given that backdrop, a sharp reaction to fears of potential competition from Amazon (NASDAQ:AMZN) isn’t surprising, but it may be misplaced.
“We believe these fears are misguided — just as they were during two prior pullbacks over the past year,” Mehrotra wrote, pointing out that Vertiv’s (VRT) stock has rebounded strongly after similar dips. “We think this time is no different.”
According to UBS, the idea that Amazon (AMZN) is directly competing with Vertiv (VRT) in liquid cooling doesn’t hold up under scrutiny. Developing a full-scale cooling offering would require Amazon (AMZN) to manufacture a wide array of specialized components, from coolant distribution units (CDUs) to radiators and pump systems, which UBS views as unlikely.
Instead, Mehrotra said Amazon (AMZN) is far more likely to be working with Vertiv (VRT) or similar partners to develop integrated rack-scale solutions for AI workloads. These all-in-one systems streamline deployment and cooling of high-density server environments, which are increasingly critical as traditional racks struggle to handle AI’s growing power demands.
“If this is accurate, it would be a notable positive for Vertiv,” Mehrotra wrote, noting that Vertiv (VRT) and Amazon (AMZN) have a longstanding business relationship.
UBS sees Amazon’s move as part of a broader shift toward “integrated rack scalable solutions,” a category in which cloud and server vendors like Dell (DELL), Hewlett Packard Enterprise (HPE), Lenovo (OTCPK:LNVGY) (OTCPK:LNVGF), and Supermicro (SMCI) (SMCI:CA) typically compete. In that context, Mehrotra argues that Vertiv (VRT) is more likely a strategic partner than a rival.
Reaffirming UBS’s bullish stance, Mehrotra said the firm continues to see “meaningful potential upside” for Vertiv (VRT), driven by accelerating order growth in AI-related infrastructure.