‘Great tailwind’: Asset manager is bullish on this under-the-radar AI stock
Artificial intelligence-related stocks have rallied as the theme gained traction this year, with investors piling into favorites such as Nvidia and Microsoft . But according to Deepwater Asset Management, there’s one under-the-radar AI stock that will be essential for the long-term infrastructure rollout of artificial intelligence. That’s U.S.-listed company Vertiv , which makes cooling solutions for data centers. “An under-the-radar AI stock is Vertiv,” Doug Clinton, managing partner at Deepwater, told CNBC’s “Street Signs Asia” last week. “Every data center that’s buying GPUs from Nvidia, one of the problems that they have is these GPUs run very hot when they’re under load. Vertiv provides solutions to help cool those chips and make data centers operate more efficiently.” Nvidia dominates the market for AI chips with over 80% market share , according to some estimates. The company’s specialty is graphics processing units, or GPUs, which have become the preferred chips for the large AI models that underpin generative AI software. “We think [Vertiv has] a great tailwind for the next three to five years as this AI hardware buildout continues,” Clinton added. Deepwater’s Innovator Deepwater Frontier Tech ETF (LOUP) had Vertiv among its top 10 holdings, at 3.49%, as of June 30. The ETF has, since its 2018 inception, outperformed its peers, according to data from the firm, returning 46% since 2018, compared to the Ark Innovation ETF ‘s (ARKK) -6%, and the Global X Robotics and Artificial Intelligence ETF ‘s (BOTZ) 15%. Over the past 12 months, LOUP is up around 37%, ARKK is 10.5% higher and BOTZ is up 37.5%. The Innovator Deepwater Frontier Tech ETF aims to provide investors “with exposure to themes that we will be talking about in 3-5 years,” with a focus on companies involved in AI, fintech, robotics, electric vehicles and more. Apart from Vertiv, other stocks in its top 10 holdings included CrowdStrike , Adobe , Uber and Unity Software , as of June 30. Around 67% of the fund is U.S.-focused, with the rest allocated to global markets such as the Netherlands, Taiwan and South Korea. Alphabet Alphabet , which Clinton described as Deepwater’s largest AI holding, has a “great catalyst” for the latter half of this year: the launch of its latest AI model Gemini. “We think it is the most powerful model that they’ve released to date,” Clinton said. “And some of the early indications suggest it could be better than OpenAI’s [Chat]GPT.” “If that’s the case, I think the narrative around Google changes from them being this AI laggard to maybe jumping ahead and being the leader,” he added, noting that Alphabet had been “late to the game.” He believes that a fair value for Alphabet is something in the mid-to-high 20s for its price-to-earning multiple. Alphabet’s current P/E ratio is at 29.7, according to FactSet. —CNBC’s Kif Leswing contributed to this report.
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