Is Now the Right Time to Buy Vertiv Ahead of a Data Center Growth Boom?

The global data center industry is on the cusp of a seismic shift. As artificial intelligence (AI) transforms industries, from healthcare to finance, the demand for high-performance computing infrastructure has surged. At the heart of this transformation lies Vertiv (VRT), a leader in critical digital infrastructure. While near-term tariff challenges have temporarily clouded its financial outlook, a closer look reveals a compelling case for long-term margin expansion and strategic resilience.

The AI-Driven Infrastructure Gold Rush

The AI boom is no longer a speculative trend—it's a $1.5 trillion market by 2030, according to McKinsey. Hyperscalers like Microsoft, Amazon, and Google are racing to build out AI-specific infrastructure, while enterprises across sectors are investing in on-premise AI solutions. Vertiv, which provides power, cooling, and digital infrastructure solutions for data centers, is uniquely positioned to benefit.

In Q4 2024, Vertiv's trailing twelve-month (TTM) organic orders rose 30% year-over-year, with the Americas region seeing a 50% surge. Full-year 2025 guidance now includes $9.2 billion in net sales, with organic growth of 16%—a testament to the strength of the AI-driven demand tailwind.

Tariffs: A Short-Term Headwind, Not a Long-Term Threat

The U.S. tariffs on Chinese imports have indeed impacted Vertiv's margins. In Q2 2025, adjusted operating margins fell to 18.5%, a 110-basis-point decline year-over-year, due to higher supply chain costs and manufacturing transition expenses. The company has revised its 2025 adjusted operating margin guidance to 20.0% from 20.5%, acknowledging the drag from tariffs.

However, this is a temporary setback. Vertiv has already begun mitigating these pressures through a multi-pronged strategy:
1. Manufacturing Diversification: 90% of U.S.-bound products are now produced in Mexico or under USMCA-compliant terms, with a goal of 100% by 2026. This reduces exposure to Section 301 tariffs on Chinese imports.
2. Pricing Adjustments: Tariff-related costs are being passed through to customers via surcharges and renegotiated contracts. Management notes that clients are prioritizing AI infrastructure projects over short-term cost delays.
3. Operational Efficiency: Capacity expansion in the U.S., Asia-Pacific, and Europe is reducing cross-border shipments, while productivity gains are offsetting some margin pressure.

CEO Giordano Albertazzi has emphasized that these initiatives will “materially resolve” margin challenges by year-end 2025, with a path to restoring margins to 21.5% levels by 2026.

The Long-Term Margin Play

While tariffs are a near-term drag, Vertiv's long-term margin trajectory remains intact. The company's 2029 target of 25% adjusted operating margins hinges on three pillars:
1. Scale: With $9.2 billion in 2025 sales, Vertiv is leveraging volume leverage to drive cost efficiencies.
2. Innovation: Investments in next-gen cooling and power solutions for AI workloads (which require 3-5x more energy than traditional servers) position Vertiv to capture premium pricing.
3. Geographic Diversification: Expanding into high-growth markets like India and Southeast Asia, where data center demand is rising rapidly, will further insulate the business from U.S. trade policy volatility.

Valuation and Risk Considerations

At a forward P/E of 12x and a price-to-adjusted EBITDA of 8x, Vertiv trades at a discount to its historical averages and peers like Rackspace (REXI) and Switch (SWCH). This undervaluation reflects the market's focus on near-term tariff risks, which management has already priced into the revised guidance.

However, investors should monitor two risks:
1. Tariff Escalation: A full reinstatement of reciprocal tariffs could delay margin recovery.
2. Execution Risks: Rapid growth in AI infrastructure requires flawless execution in manufacturing and supply chain transitions.

Investment Thesis

The case for Vertiv is a classic “buy the dip” scenario. The company is navigating a temporary margin headwind in a sector poised for explosive growth. With tariffs expected to be neutralized by 2026 and AI demand accelerating, Vertiv's path to 25% margins by 2029 is achievable.

For investors with a 3–5 year horizon, Vertiv offers a compelling combination of defensive cash flow (adjusted free cash flow of $362 million in Q4 2024) and growth potential. The stock's current valuation discounts the long-term upside, making it an attractive entry point ahead of the data center boom.

Final Verdict: Buy for long-term margin expansion and AI-driven infrastructure growth, but maintain a 12–18 month time horizon to allow for tariff mitigation and margin recovery.