Vertiv: A Beacon in the AI Infrastructure Surge – Buy Now Despite Tariffs

Vertiv (VRT), a global leader in critical infrastructure for data centers and edge computing, has emerged as a standout performer in the AI boom, with its Q1 2025 earnings underscoring its ability to navigate macroeconomic headwinds. While tariffs and geopolitical risks loom large, Vertiv’s strategic moves—bolstered by surging AI demand, fortress-like free cash flow (FCF), and supply chain resilience—position it as a compelling buy. Here’s why investors should act now.

The Catalyst: AI-Driven Order Growth and Backlog Strength

Vertiv’s Q1 results were a masterclass in execution. Trailing twelve-month orders rose 20% year-over-year, while Q1 orders jumped 13% YoY and 21% sequentially. The $7.9 billion backlog, up 25% from 2024, is a red flag for bulls: 80% of this backlog is tied to projects requiring over 12 months of lead time, signaling locked-in demand for AI and hyperscale data center infrastructure. This is no fleeting surge; it’s a multiyear pipeline.

The company’s iGenius initiative—a partnership with NVIDIA to build modular AI data centers—has already landed a $1.2 billion project for an Italian tech giant. Vertiv’s designs for NVIDIA’s NVL72 platforms, enabling “AI factories” with liquid cooling and high-density compute, are a testament to its technical edge. With AI spending projected to hit $300 billion annually by 2030, Vertiv is perfectly positioned to capture this growth.

Free Cash Flow: A Wall of Money

Vertiv’s FCF metrics are staggering. Q1’s $265 million FCF (up $164 million YoY) was fueled by 35% growth in operating profit to $337 million. Even with tariffs eating into margins, Vertiv’s full-year FCF guidance of $1.25–1.35 billion is achievable thanks to operational leverage and trade working capital improvements. At a $5.4 billion market cap, this FCF yield (23%) is a steal compared to peers like RackN (RKLB) or Eaton (ETN).

Mexico: The Tariff Mitigation Masterstroke

Vertiv’s supply chain shift to Mexico is a game-changer. By USMCA-qualifying 90% of U.S. production, the company has slashed its reliance on Chinese imports (now <10% of U.S. sales). The goal? 100% Mexico/U.S. sourcing by 2026, neutralizing tariffs permanently. This strategy isn’t just defensive—it’s offensive. Vertiv’s Mexico factories now serve as hubs for NVIDIA’s AI supercomputers and sovereign projects in China, where local factories are expanding to meet demand.

CEO Giordano Albertazzi’s $100 million in annualized savings from its Vertiv Operating System (VOS) further insulates margins. Even with a 110-basis-point margin dip in Q2, Vertiv’s long-term 25% operating margin target remains intact once tariffs are neutralized.

Analyst Upgrades and Stock Catalysts

Wall Street is catching on. JPMorgan’s Stephen Tusa upgraded Vertiv to Overweight, citing its “AI infrastructure monopoly” and raised his price target to $100 (a 30% upside). Meanwhile, Vertiv’s $2.3 billion liquidity and 0.8x net leverage give it a fortress balance sheet to weather any macro turbulence.

Why Tariffs and Recession Fears Won’t Derail This Train

Critics argue that tariffs and a potential recession could crimp demand. But Vertiv’s $7.9 billion backlog—80% tied to multiyear projects—is recession-proof. Even if spending slows, these contracts are too far along to cancel. Meanwhile, the $275 million capex budget for 2025 ensures Vertiv can scale without overextending.

The Bottom Line: Buy Vertiv Now

Vertiv isn’t just a tariff play—it’s a decade-long secular story. With AI infrastructure spending exploding, Vertiv’s leading position in cooling, power, and modular solutions gives it a moat in an $800 billion market. Its Mexico strategy and FCF machine ensure it can outlast competitors.

Investors should buy Vertiv at $76.50 today—a stock poised to hit $100 by year-end. The risks are manageable, and the rewards are asymmetric. In a world where AI is the next tech revolution, Vertiv is the unsung hero building its foundation. Don’t miss the train.