HVAC Company Shares Decline Following Nvidia Data Center Cooling Announcement
Shares of several U.S. heating, ventilation, and air conditioning (HVAC) related companies experienced declines on Tuesday. This occurred after Nvidia CEO Jensen Huang indicated that the company's forthcoming chips could substantially reduce cooling requirements in data centers.
Market Reaction
Johnson Controls International shares decreased by 7.5% to $112.40, while Trane Technologies stock fell 5.3% to $370.40. Both companies reached multi-month lows and were among the top percentage decliners on the S&P 500 index. Carrier Global shares also fell by 1.1%.
In contrast, nVent Electric shares increased by 0.5%. Vertiv Holdings shares declined by 2.1%.
Nvidia's Announcement
Speaking at the Consumer Electronics Show (CES) in Las Vegas on Monday, Nvidia CEO Jensen Huang announced that the company's next generation of chips is now in "full production." The Vera Rubin platform, which consists of six separate Nvidia chips, is anticipated to be released later this year. Regarding cooling requirements, Huang stated that "no water chillers are necessary for data centres."
Analyst Perspectives
Barclays analysts, led by Julian Mitchell, commented on the significance of Nvidia's statements within the artificial intelligence (AI) ecosystem. They identified Johnson Controls International, Trane Technologies, and Carrier Global as companies potentially most affected by these developments.
Barclays estimates indicate that data centers constitute a low-double-digit percentage of Johnson Controls' total sales. For Trane Technologies, data centers account for approximately 10% of sales, and for Carrier Global, they represent about 5% of sales.
The analysts also noted that nVent Electric could benefit from these developments, citing its lack of presence in space cooling, chillers, or air handling, coupled with a "decent position in data center liquid cooling." Vertiv Holdings, a data center power equipment manufacturer, was also highlighted as a potential beneficiary due to its "strong historical position in precision air cooling" and "strong position in liquid cooling."