Al Root

AI is everywhere, thanks to power-hungry data centers capable of everything from writing college essays to teaching cars to drive themselves.

AI's growth is pressuring the electricity grid and pushing up power prices, which has been a boon to many companies, including utilities and utility suppliers. Data centers don't need just power. They need to be kept cool, too.

AI chips in AI servers use a lot of power, up to 10 times more than conventional servers, which also means they run hot. While a conventional laptop might start a fan to cool things off, that won't cut it in AI. Liquid cooling has become a necessity, which has triggered an acquisition race by AI infrastructure suppliers to ensure they don't miss out on a business opportunity.

On Monday, electrical components supplier Eaton announced the acquisition of Boyd Thermal from Goldman Sachs Asset Management. It's a big deal. Eaton is paying $9.5 billion, or 22.5 times Boyd's estimated 2026 earnings before interest, taxes, depreciation, and amortization, or Ebitda.

"Bringing together Boyd Thermal's highly-engineered liquid cooling technology and global service model with Eaton's existing products and scale will provide enhanced value to customers," said Eaton CEO Paulo Ruiz. "In data centers particularly, our combined expertise in both power and liquid cooling from the chip to the grid will enable customers to manage increasing power demands more effectively."

Bernstein analyst Chad Dillard called the move "much-awaited" in a Monday report. "Management has been questioned for years now about a potential entry into cooling based on the market's high-growth potential and complementary solutions to its existing data center portfolio."

Eaton and its peers need liquid cooling technology. Schneider Electric bought 75% of liquid cooling firm Motivair in 2024. Vertiv, also on Monday, bought PurgeRite to "expand [its] liquid cooling services portfolio."

Vertiv, Eaton, and Schneider are three large integrators of thermal management systems. Of the three, Vertiv stock has been the strongest as more of its business is AI-related. Companies such as nVent supply cooling components and technology.

Coming into Tuesday trading, shares of Vertiv were up 68% year to date. Eaton shares were up 16%. Schneider shares were up a modest 1%. nVent shares were up an impressive 65%.

All four stocks trade for above-average price-to-earnings ratios, averaging 28 times estimated 2026 earnings. The S&P 500 trades for closer to 22 times.

That means the companies need to grow quickly, and cooling technology is one way they plan to achieve that.

Eaton's stock was down 6.9% in early trading on Tuesday, and it wasn't because of the Boyd deal. Shares dropped after the company reported weaker-than-expected third-quarter sales. Investors, these days, want growth, which is why Eaton bought Boyd.

Write to Al Root at allen.root@dowjones.com

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November 04, 2025 12:40 ET (17:40 GMT)

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