Competition to build artificial intelligence infrastructure is creating a powerful new growth engine for companies that can address one of the industry's greatest challenges: preventing increasingly power-hungry AI servers from overheating. This is the key message from a recent investor call hosted by BNP Paribas equity research analyst Andrew Buscaglia. The call featured a former Microsoft data center expert and consultant discussing the future of liquid cooling technology.

The discussion has increased BNP Paribas's optimism about the sector's prospects, particularly for companies like Vertiv Holdings LLC (VRT) and Eaton Corp PLC (ETN), which offer broad infrastructure solutions combining power management with advanced cooling systems.

System Providers Hold the Competitive Edge

The expert indicated that hyperscale data center operators increasingly prefer suppliers offering integrated, end-to-end cooling solutions over those providing standalone components. While investors may worry about cooling hardware eventually becoming commoditized, the expert believes companies capable of delivering complete systems should maintain their advantage. Among U.S. firms, Vertiv Holdings LLC is viewed as having a particularly strong market position due to its expertise in power management and thermal systems. Eaton Corp PLC is also favored for its broad capabilities in power infrastructure, spanning grid connections, power delivery, and components for AI chips.

The expert noted that "the real winners will be the companies that understand the entire system," emphasizing that cooling and power demands are becoming increasingly interconnected as AI computing density rises.

AI Server Upgrades to Fuel Cooling Demand

The upcoming Rubin AI platform from Nvidia, expected later this year, could serve as another catalyst for thermal solution suppliers. As rack densities increase, data centers will require more sophisticated cooling architectures, which the expert estimates could drive cooling capacity growth of over 20% per rack. This opportunity may expand further as the industry moves toward 800V DC architectures and eventually approaches power loads of around 1 megawatt per rack—a level considered extreme just a few years ago. These trends are expected to push liquid cooling deeper into mainstream data center design as operators seek methods to manage rising thermal loads without sacrificing performance.

Liquid Cooling Remains a Critical Component

The expert also countered the notion that traditional chiller systems might become obsolete. While the mix of air and liquid cooling technologies may evolve over time, chillers are still expected to remain a vital part of data center cooling and thermal management systems. This perspective may reassure investors concerned that rapid technological change could diminish the importance of existing cooling infrastructure.

Opportunities in the European Market

In Europe, BNP Paribas highlighted LU-VE as its preferred name in the cooling space. The firm noted the growing popularity of dry coolers and "free cooling" systems that utilize ambient air to assist in facility cooling and reduce energy consumption. LU-VE is recognized as a leading supplier of these technologies. The outlook for CAREL and Belimo is more nuanced. Although both companies have exposure to the data center market, the expert pointed to uncertainty regarding their ability to capture meaningful incremental market share from the shift to liquid cooling, especially given their evolving product portfolios.

The Broader Investment Thesis

The report underscores a wider investment theme emerging alongside the AI boom: infrastructure services can be as profitable as selling chips. While Nvidia and other semiconductor firms have captured most of Wall Street's attention, the rapid growth in power consumption and heat generation inside AI data centers is also driving a corresponding spending cycle on electrical equipment, cooling systems, and facility infrastructure. As hyperscale giants like Microsoft, Amazon, Alphabet, and Meta pour hundreds of billions of dollars into AI, investors are increasingly focused on which companies can capture this wave of investment. BNP Paribas's analysis suggests Vertiv Holdings LLC and Eaton Corp PLC could be among the most promising beneficiaries, given their involvement across multiple layers of the AI infrastructure stack rather than reliance on a single cooling technology or component category.