Key Points
Vertiv is carving out a niche in cooling and power supplies for data centers.
GE Vernova is building the infrastructure to support those data centers.
Vertiv (NYSE: VRT) and GE Vernova (NYSE: GEV) have both benefited from the rapid growth of the cloud infrastructure and AI markets. Vertiv produces thermal management, liquid cooling, and uninterruptible power supply (UPS) systems for those power-hungry data centers. GE Vernova, which was spun off from General Electric (NYSE: GE) in 2024, sells the turbines, transformers, and substations that deliver the power to those data centers.
Both companies recently posted third-quarter earnings reports that easily exceeded Wall Street's estimates. Vertiv's revenue surged 61% year over year, driven by 55% organic growth and 6% from acquisitions, and it expects its full-year revenue to increase 38% organically.
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GE Vernova's revenue rose 27% year over year, with 18% organic growth, as its total orders jumped 96% organically. It expects its full-year revenue to rise 22%-25%.
However, Vertiv and GE Vernova are still trading at 45% and 24% below their all-time highs from earlier this year, respectively. Let's see why they pulled back -- and which one is a better buy.
Why did Vertiv and GE Vernova pull back?
Vertiv and GE Vernova both struggled to maintain their high valuations after the Fed raised its benchmark rates for the first time in three years this September. That pressure could force utilities and data center operators to throttle their AI infrastructure spending, while higher yields on fixed income investments drew investors away from riskier growth stocks.
Vertiv and GE Vernova also faced other near-term challenges. Vertiv struggled with supply chain constraints and the uneven timing of its larger contracts, and its recent takeover of UtilityInnovation Group -- a developer of microgrid solutions, advanced power controls, and behind-the-meter power architecture designs for data centers -- could squeeze its margins.
GE Vernova's Power and Electrification businesses were firing on all cylinders, but its smaller Wind segment remained weak. It's also ramping up spending to increase capacity, and its planned acquisition of Trench Group could further compress its margins.
Why are they still solid investments?
From 2025 to 2028, analysts expect Vertiv's revenue and EPS to grow at CAGRs of 29% and 49%, respectively. During that same period, they expect GE Vernova's revenue and EPS to increase at CAGRs of 17% and 24%, respectively.
Vertiv trades at 25 times next year's earnings, while GE Vernova has a forward multiple of 37. Neither stock is a screaming bargain yet, but they look more attractive than they did a few months ago. I'd be willing to buy both stocks at these prices -- but if I had to pick one over the other, I'd start with Vertiv because it's growing faster and trades at a lower valuation.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Aerospace, GE Vernova, and Vertiv. The Motley Fool has a disclosure policy.