BNP Paribas Bank explores the liquid cooling track: AI heat dissipation needs will continue to surge, Eaton Corp. Plc (ETN.US) and Vertiv (VRT.US) will become winners.

Competition to build artificial intelligence infrastructure is creating a strong growth engine for companies that can solve one of the industry's biggest challenges: preventing AI servers from overheating due to increasing power consumption. This key information was conveyed during an investor conference call recently hosted by Andrew Buscaglia, a stock research analyst at French bank BNP Paribas. The conference featured a former Microsoft Corporation data center expert and consultant discussing the future of liquid cooling technology. This discussion has made BNP Paribas more optimistic about the industry outlook, especially for companies like Vertiv (VRT.US) and Eaton (ETN.US), which provide comprehensive infrastructure solutions combining power management and advanced cooling systems. System providers have the strongest competitive advantage Experts say that large-scale data center operators are increasingly opting for suppliers that can provide integrated end-to-end cooling solutions, rather than individual components. While investors are concerned that cooling hardware may eventually become commoditized, this expert believes that companies offering comprehensive systems should maintain an advantage. In the U.S., Vertiv is considered to have a particularly strong market position due to its expertise in power management and cooling systems. Eaton Corp. Plc is also highly favored for its extensive capabilities in the power infrastructure sector, covering grid connections, power transmission, and artificial intelligence chips. The expert pointed out that "the real winners are companies that understand the entire system," emphasizing that cooling and power requirements are becoming increasingly intertwined with the increasing density of artificial intelligence computing. AI server upgrades expected to drive cooling growth NVIDIA Corporation (NVDA.US)'s upcoming Rubin AI platform, set to launch later this year, may serve as another catalyst for cooling suppliers. With the increase in rack density, data centers will require more complex cooling architectures, leading to an estimated growth of over 20% in cooling capacity per rack. As the industry moves towards 800V direct current architectures, eventually approaching around 1 megawatt power loads per rack (which would have seemed extreme just a few years ago), this opportunity could further expand. As operators seek ways to manage the growing heat load without sacrificing performance, these trends are expected to drive the deeper application of liquid cooling technology in mainstream data center design. Despite ongoing technological changes, liquid cooling units remain crucial The expert also refuted claims that traditional liquid cooling system units may become obsolete. While the combination of air and liquid cooling technologies may evolve over time, liquid cooling units are expected to remain an important component of data center cooling and cooling systems. This perspective may reassure investors concerned that rapid technological changes could render existing cooling infrastructure less relevant. Emerging opportunities in Europe In Europe, BNP Paribas highlighted LU-VE as its preferred brand in the refrigeration sector. The company noted that dry coolers and "natural cooling" systems are becoming increasingly popular, utilizing ambient air to aid in facility cooling and reduce energy consumption. LU-VE is considered one of the leading suppliers of these technologies. The outlook for CAREL and Belimo is more complex. While both companies are involved in the data center market, the expert pointed out that their ability to gain meaningful incremental market share from the transition to liquid cooling remains uncertain, especially with the constant changes in product offerings. Why investors should pay attention The report emphasizes a broader investment theme that accompanies the AI boom: infrastructure services are as profitable as selling chips. While NVIDIA Corporation and other semiconductor companies have attracted most of Wall Street's attention, the rapid growth in power consumption and heat generation within AI data centers has also brought corresponding expenditure cycles for electrical equipment, cooling systems, and facility infrastructure. As tech giants like Microsoft Corporation, Amazon.com, Inc., Alphabet, and Meta invest billions of dollars in AI, investors are increasingly focusing on which companies can capitalize on this investment trend. BNP Paribas's analysis suggests that Vertiv and Eaton Corp. Plc may be among the most promising beneficiaries as they are involved in multiple aspects of the AI infrastructure stack, rather than relying on a single cooling technology or component category.