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

It's been a while since data center equipment company Vertiv's (NYSE: VRT) stock looked like a great value, but that time has come around again. The ongoing demand for artificial intelligence (AI) applications creates unprecedented data growth, which only means more investment in data centers.

The good news is that the broad-based sell-off in the Nasdaq Composite (NASDAQINDEX: ^IXIC) and some near-term negative news have brought stocks like Vertiv back into value range, and now could be a great time to buy the stock on a dip.

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A hidden AI stock to buy

Nvidia partner Vertiv has a critical role in the data centers that power AI. The company designs, manufactures, installs, and services critical digital infrastructure. Its costumers include data centers selling into hyperscalers like Microsoft's Azure and Alphabet's Google Cloud, colocation providers like Equinix and Digital Realty, and large enterprises with their own data centers. Vertiv also sells to communications companies and various commercial and industrial customers.

Its equipment helps customers with their critical power, thermal management (a crucial issue in data centers), and monitoring needs, and it also services its equipment. Its partnership with Nvidia means Vertiv co-develops its architecture so its power and cooling systems are compatible with Nvidia's solutions, including the Blackwell platform.

Surging demand

The Nvidia partnership and underlying demand for data centers led to an explosion in revenue at Vertiv, which is apparent in the chart of three-year sales growth.

VRT Revenue (TTM) data by YCharts

Moreover, management expects that momentum to continue in 2025, with its guidance calling for:

• A 16% increase in organic sales to $9.2 billion.
• Adjusted operating profit margin expansion from 19.4% in 2024 to 21% in 2025, leading to a 25% increase in adjusted operating profit to $1.94 billion.
• Adjusted free cash flow (FCF) growing 15% to $1.3 billion.

Why Vertiv stock is a good value now

Let's take a quick look at why the stock has been sold off this year (down 23% year to date as I write this) and why it's probably not something to be unduly worried about.

First, there's been a broad market sell-off in technology stocks. Part of this comes down to valuation concerns, and another part comes down to the fear of a tariff-induced slowdown in the economy.

There are tangible signs of slowing. For example, Delta and United Airlines have spoken of a slowdown in bookings, industrial giant 3M sees some order push-outs, and in the tech arena, automated semiconductor test equipment company Teradyne took a knife to its full-year guidance due to, you guessed it, order push-outs.

The inside of a data center. Image source: Getty Images.

Second, although Vertiv's trailing-12-month orders rose 30% in the fourth quarter, they were flat in the fourth quarter compared to the same period in 2024.

Both issues may prove temporary. Tariffs could be eased, and, naturally, there will be a short-term impact as companies adjust to new trading conditions. As for Vertiv's fourth-quarter orders, the main impact came from Europe, where data centers, starting on Jan 1, must report their power usage effectiveness (PUE).

This requirement may cause a temporary slowdown due to the extra cost of compliance and adjusting to the new regulations. However, commercial real estate company CBRE expects data center supply in Europe to grow by 20% in 2025 alongside declining vacancy rates -- a bullish signal. Moreover, Vertiv's management maintains demand will accelerate in Europe in 2025.

A stock to buy?

The share price dip means that Vertiv trades at 25.6 times expected FCF in 2025, dropping to 18.8 times FCF in 2026 if you accept the Wall Street consensus for $1.77 billion in FCF in 2026. Those valuations are too cheap for a company growing sales at a mid-teens rate and earnings above 20%. As such, it's an appealing stock for investors looking to buy on a dip.

Should you invest $1,000 in Vertiv right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 3M, Alphabet, Digital Realty Trust, Equinix, Microsoft, and Nvidia. The Motley Fool recommends Delta Air Lines and Teradyne and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.