Vertiv, nVent Not at Risk of Disintermediation Despite AWS' New Liquid Cooled Servers, Says RBC Capital Analyst

RBC Capital analyst Deane Dray believes that original equipment electrical manufacturers like Vertiv and nVent Electric will not be disintermediated by Amazon Web Services' (AWS) new custom artificial intelligence liquid-cooled servers. Dray notes that hyperscalers often develop their own next-gen liquid cooling systems and that manufacturers like nVent provide critical development and test support. He advises against "panic selling" and says that any concerns are overdone.

Amazon Web Services (AWS) recently unveiled a custom artificial intelligence (AI) liquid-cooled server, raising questions about the future of original equipment electrical manufacturers like Vertiv and nVent Electric. RBC Capital analyst Deane Dray, however, does not foresee these companies being disintermediated by AWS's new technology.

AWS's new In-Row Heat Exchanger (IRHX) system is designed to handle the intense thermal demands of Nvidia's high-performance AI GPUs, specifically the Blackwell GPUs. This system integrates both liquid and air-cooling elements, providing efficient heat management without extensive data center retrofits or increased water consumption [2]. The IRHX system was co-developed with Nvidia and brought to market in just 11 months, coinciding with AWS's launch of new AI server instances [3].

RBC Capital analyst Deane Dray notes that it is common for hyperscale players like AWS to develop their own next-gen liquid cooling systems. These manufacturers provide critical development and test support to hyperscalers for custom systems [1]. Dray advises against "panic selling" and says that any concerns about the impact on Vertiv and nVent's future growth prospects are overdone.

While AWS's IRHX system could potentially disrupt the data center cooling market, it is not a new development. AWS had already announced its plans for this custom system on June 11 [1]. Additionally, AWS's move to vertically integrate critical infrastructure components does not necessarily mean that traditional cooling vendors will be displaced entirely. Instead, it may lead to a shift in how these companies operate and innovate.

In conclusion, while AWS's new custom AI liquid-cooled server raises questions about the future demand for Vertiv and nVent's cooling solutions, RBC Capital analyst Deane Dray does not believe these companies will be disintermediated. The market is likely to evolve, with both AWS and traditional cooling vendors finding ways to coexist and innovate.

References:
[1] https://www.tipranks.com/news/the-fly/vertiv-nvent-wont-be-disintermediated-by-aws-says-rbc-capital-thefly
[2] https://ih.advfn.com/market-news/article/12450/vertiv-shares-slide-11-after-aws-launches-in-house-cooling-tech-for-ai-servers
[3] https://www.investing.com/news/stock-market-news/amazon-web-services-unveils-custom-cooling-for-nvidia-ai-chips-93CH-4129012