Could This Nvidia Partner Be a Hidden Gem That Boosts Your Portfolio?

Core Viewpoint - The stock of Vertiv (VRT) is currently seen as a great value due to the ongoing demand for artificial intelligence (AI) applications, which is driving unprecedented data growth and increased investment in data centers [1]. Group 1: Company Overview - Vertiv plays a critical role in the data centers that support AI, designing, manufacturing, installing, and servicing essential digital infrastructure [3]. - The company serves a diverse customer base, including hyperscalers like Microsoft Azure and Google Cloud, colocation providers such as Equinix and Digital Realty, and large enterprises with their own data centers [3]. - Vertiv's equipment addresses critical power, thermal management, and monitoring needs, and the company also provides servicing for its products [4]. Group 2: Financial Performance - The partnership with Nvidia has significantly boosted Vertiv's revenue, as evidenced by a three-year sales growth chart [5]. - Management projects a 16% increase in organic sales to $9.2 billion and a 25% increase in adjusted operating profit to $1.94 billion by 2025, alongside an expansion of adjusted operating profit margin from 19.4% in 2024 to 21% in 2025 [7]. Group 3: Market Conditions - The stock has experienced a 23% decline year-to-date due to a broad market sell-off in technology stocks, driven by valuation concerns and fears of a tariff-induced economic slowdown [8]. - Despite a 30% increase in trailing-12-month orders in the fourth quarter, orders were flat compared to the same period in 2024, with the slowdown primarily attributed to European regulatory changes [10]. - The new requirement for data centers in Europe to report power usage effectiveness (PUE) may temporarily impact orders, but a projected 20% growth in data center supply in Europe by 2025 indicates a bullish outlook [11]. Group 4: Investment Opportunity - Vertiv's current share price reflects a valuation of 25.6 times expected free cash flow (FCF) in 2025, decreasing to 18.8 times FCF in 2026, which is considered attractive for a company with mid-teens sales growth and earnings growth above 20% [12].