Here's an unusual derivative play off the A.I. boom
One liquid cooling stock could be an unexpected beneficiary of the artificial intelligence boom as datacenters power stronger workloads, according to RBC Capital Markets. Analyst Deane Dray highlighted nVent , a provider of cooling systems used in datacenters that was spun off from Pentair in 2018 , as enjoying a "first-mover advantage" when it comes to keeping large groups of of networked computer servers operating. Liquid cooling demand could add one percentage point of annual growth for the company over the next five years, according to RBC. "Overall, datacenters represent roughly 13% of nVent's revenue, but we believe their differentiated product offering for liquid cooling represents an attractive growth opportunity for the company," Dray wrote, noting that a large portion of its sales stem from other high-growth areas like renewables and electrification. Across the board, RBC expects demand for liquid cooling to potentially reach a total addressable market of $2 to $3 billion and grow at a compounded annual rate of 25% as AI demand grows and datacenters require more advanced cooling technology over traditional HVAC companies. "Rising electricity prices, cost-effectiveness, space optimization through higher densities, AI growth, and ESG considerations are among the key market drivers," Dray said. "As the digital landscape continues to evolve, liquid cooling is poised to play a pivotal role in meeting the escalating cooling demand of modern datacenters." Other potential winners poised to benefit from a tighter market supply include Digital Realty Trust and digital infrastructure company Equinix , Dray said. He also highlighted Dover , Eaton and Wesco as names with exposure to liquid cooling. — CNBC's Michael Bloom contributed reporting