Data center cooling-related stocks drop after Nvidia CEO Huang's comments
Jan 6 (Reuters) - Shares of U.S. heating, ventilation and air conditioning-related companies dropped on Tuesday after Nvidia CEO Jensen Huang said that the company's upcoming chips could significantly reduce cooling requirements in data centers.
Johnson Controls International dropped 7.5% to $112.40 and Trane Technologies lost 5.3% to $370.40. Both stocks hit multi-month lows and were among the biggest percentage decliners on the S&P 500.
Speaking at the Consumer Electronics Show (CES) in Las Vegas on Monday, Huang said Nvidia's next generation of chips is in "full production." The Vera Rubin platform, made up of six separate Nvidia chips, is expected to debut later this year.
When talking about the cooling requirements, Huang said that "no water chillers are necessary for data centres."
Barclays analysts said in a note led by Julian Mitchell that "given the primacy of Nvidia to the whole AI ecosystem, one should not take their comments lightly, although they seem rather dramatic at first glance."
The analysts said the companies that could be most affected include Johnson Controls International, Trane Technologies and Carrier Global.
They estimate that data centers represent a low-double-digit percentage of total sales for Johnson Controls and data centers account for about 10% and 5% of sales for Trane Technologies and Carrier Global, respectively.
Carrier Global shares fell 1.1%.
The analysts also highlighted nVent Electric could benefit from these developments as it has "no presence in space cooling/chillers/air handling" but has a "decent position in data center liquid cooling."
Data center power equipment maker Vertiv Holdings could also benefit due to its "strong historical position in precision air cooling" and "strong position in liquid cooling," the analysts said.
Vertiv shares were down 2.1%, while nVent shares edged 0.5% higher.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Alan Barona)
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