The Overlooked AI Stock Poised to Outperform Nvidia and Palantir

Nvidia‘s (NVDA +2.12%) graphics processing units (GPUs) have become the foundational AI hardware for data centers, while Palantir has been one of the strongest purveyors of artificial intelligence software as a service. However, as investments with potential to grow from here, both companies may pale in comparison to liquid cooling specialist Vertiv (VRT +0.57%).

Liquid cooling has become a requirement for AI infrastructure

Liquid cooling has become essential to AI data centers. 

Cutting-edge AI chips and infrastructure generate enormous amounts of heat when they operate, and fans and air conditioners can’t cool them quickly enough. Without liquid cooling systems of the type that Vertiv provides, the chips can reach temperatures that slow their processing significantly, reduce their lifespans, or even render them unusable.

Because of this, the technology that Vertiv sells has become just as important for the AI build-out as the processors it protects. This positioning translated into 24% year-over-year revenue growth in the second quarter, and management’s full-year guidance is for 31% revenue growth, implying that growth will accelerate.

Vertiv’s operating profits jumped 44% year over year to $638 million in Q2, indicating a sustainable business model. CEO Giordano Albertazzi expressed confidence that the company could maintain its strong performances in 2026 and beyond as AI demand heats up.

A leading competitive positioning comes with a reasonable price tag

Vertiv has established itself as the clear leader in liquid cooling for AI data centers. While other companies also offer this service, Vertiv has gone all-in with this technology, and it has inked a partnership with Nvidia. Vertiv’s 800 VDC power portfolio, specifically designed to support the Rubin Ultra platform that Nvidia will roll out in 2027, is expected to come out by the end of the year. Companies looking to use the latest Nvidia technology will need to upgrade their Vertiv infrastructure components.

Management mentioned in Vertiv’s Q2 presentation that the company has a strong backlog for the second half, and pipeline momentum points to another strong year overall. While the North American region is still hot, Vertiv is also expanding across the Asia Pacific region to pursue additional growth opportunities.

This investment thesis comes with an attractive valuation for patient shareholders. Vertiv trades at a 1-year forward P/E ratio of 28, down from a peak of 41 this summer after a prolonged correction. The stock also trades at a five-year PEG ratio of 0.84; a positive PEG ratio below 1 is typically viewed as indicating that a stock is undervalued.

Vertiv’s growth engine doesn’t appear likely to slow down anytime soon. With long-term catalysts for the liquid cooling market, its valuation should improve over time.