Liquid Gold: Why These Under-the-Radar Cooling Stocks Are Heating Up the AI Race

The AI revolution is generating more than just groundbreaking algorithms—it's also producing unprecedented amounts of heat. As hyperscalers like Google, Microsoft, and NVIDIA build out AI-driven data centers, the $22.57 billion liquid cooling infrastructure market is emerging as a critical, yet underappreciated, growth engine. While software-focused AI stocks grab headlines, investors would be wise to look beneath the surface to companies like nVent Electric (NVT), Vertiv (VRTX), and Modine (MOD)—hardware enablers of AI's thermal survival. These under-the-radar players are positioned to profit from a structural shift: liquid cooling is no longer optional for high-performance computing (HPC), and their stock valuations lag far behind their explosive growth trajectories.

The Cooling Crisis: Why Liquid Is the New Air

AI workloads, particularly those relying on GPUs and TPUs, generate heat 25 times more intense than traditional servers. Air cooling, the historical standard, is ill-equipped to handle this thermal load. Enter liquid cooling, which improves energy efficiency by 30–50% and allows data centers to scale without overheating. The global market is growing at a 45% annual clip, outpacing the overall data center sector (15% CAGR), with 5% of data centers using liquid cooling today. Analysts predict this will jump to 25% by 2028, driven by hyperscalers' $500M+ investments in AI-ready infrastructure.

But who stands to profit? Let's dissect the three critical players.

nVent Electric (NVT): The Undervalued Pioneer

nVent is the unsung hero of AI cooling. Its liquid cooling segment is growing over 40% annually, contributing to 23% of its total revenue. The company's strategic acquisitions, like its $975M purchase of Avail Infrastructure Solutions' Electrical Products Group, have solidified its dominance in data center electrical and thermal infrastructure.

Crucially, nVent collaborates with all major hyperscalers, including NVIDIA, AWS, and Microsoft, providing liquid cooling solutions for their next-gen GPU platforms (e.g., NVIDIA's GB300 NVL72). Its role in designing thermal solutions for every new GPU generation cements it as an indispensable partner in AI's hardware arms race.

Yet, nVent's stock is undervalued, trading at a forward P/S ratio of 3.01X—far below peers. Analysts at RBC and William Blair see a $80 price target (10% upside), citing its “data solutions” segment's double-digit sales growth and low valuation.

Vertiv (VRTX): Backlog Powerhouse, But Overvalued?

Vertiv's $7.9B backlog (up 25% YoY) tells a compelling story. Its acquisition of CoolTerra in late 2023 thrust it into liquid cooling, and its systems now support 142kW cooling capacity for NVIDIA's advanced AI platforms. Partnerships with hyperscalers like Compass Datacenters and ZincFive amplify its reach, while its hybrid cooling systems cater to both air and liquid needs.

However, Vertiv's valuation is a hurdle. With a forward P/S of 4.17X, it's the priciest of the trio. Jefferies' Saree Boroditsky recently initiated coverage with a Buy rating and $125 target (12% upside), citing its robust balance sheet ($5B) for acquisitions and share buybacks. Yet, until its valuation aligns with fundamentals, Vertiv remains a hold for most investors.

Modine (MOD): The High-Growth Wildcard

Modine is the fastest-growing of the three, with data center revenue expected to surge 50% in 2024. Its acquisition of TMG Core (liquid cooling IP) and plans to launch a Coolant Distribution Unit (CDU) by March 2025 position it to capture 25% of data centers by 2028.

A third major hyperscaler partnership (details confidential) and expansion into Asia-Pacific markets add momentum. D.A. Davidson raised its price target to $155 (15% upside) post-investor day, highlighting execution risks but betting on MOD's strategic IP and hyperscaler traction.

Why These Stocks Beat Software Plays

While AI software stocks like NVIDIA or Alphabet dominate headlines, their valuations are priced for perfection. In contrast, liquid cooling providers offer a hardware-based moat: their solutions are essential for AI's physical infrastructure, and demand is binary—data centers either cool or fail.

The trio's average forward P/S of 3.7X is modest compared to software peers trading at 10X+ multiples. With hyperscalers' capex budgets skewing toward cooling (40% of data center investments), these companies are de-risked plays on AI's long-term growth.

The Bottom Line: Prioritize NVT, Bet on MOD

• Buy nVent (NVT) first: It's cheap, has the strongest partnerships, and is a pioneer in a $3B market.
• Consider Modine (MOD) for growth: Its 50%+ revenue ramp and CDU launch make it a high-risk, high-reward bet.
• Hold Vertiv (VRTX) until its valuation corrects.

The AI era isn't just about code—it's about keeping that code cool. These three companies are the unsung heroes of the next phase of compute, and their stocks offer a safer, hardware-backed path to profit.