Vertiv Drops After Amazon Unveils In-House Liquid Cooling System, Marking Pivot To Liquid

Shares of U.S.-based data center infrastructure firm Vertiv Holdings tumbled in New York on Thursday after Amazon Web Services unveiled its own in-house liquid cooling system for data centers, raising concerns about future demand for Vertiv’s products.

AWS revealed in a blog section of its website about “three things” for data centers to work properly, including:

1. The first is a building, the kind of thing that can protect the servers from rain, snow, and even tumbleweed.

2. The second is power, the juice that keeps all those servers running.

3. The third is cooling. This is the element without which those servers could overheat and shut down in a matter of minutes. It’s also the one Amazon Web Services (AWS), and the entire data center industry, is in the midst of transitioning from an air-based to a liquid-based solution.

AWS explained that air-based systems have primarily handled cooling at its data centers, pulling in outside air and circulating it through server racks. However, as AWS noted, “air alone isn’t always enough.”

“We’ve crossed a threshold where it becomes more economical to use liquid cooling to extract the heat,” Dave Klusas, AWS’s senior manager of data center cooling systems, wrote in a statement. 

Klusas’s team developed a custom in-house direct-to-chip liquid cooling system that is “ready for use at scale” and “will be ramped up this summer to take on more and more of the cooling workload, and start moving into other data centers,” according to AWS. 

Bloomberg analyst Mustafa Okur’s first take on the liquid cooling system said this “could weigh on Vertiv’s future growth prospects.”

Okur noted, “Around 10% of overall sales come from liquid cooling, we calculate, and AWS may be one of the largest customers.” 

The news sent Vertiv shares down 6.5% in early afternoon trading, the largest daily loss since mid-April. 

The broader understanding here is the “chilling opportunity” theme playing out in the data center space, which suggests that more powerful and energy-intensive AI chips will require liquid cooling. 

UBS identified Chemours as a top pick last week… Read the full note here.