Vertiv rated overweight, AAON as sector weight by KeyBanc on AI data center spending

KeyBanc Capital Markets initiated coverage of Vertiv Holdings Co. (VRT) with an Overweight rating and a $360 price target, while launching coverage of AAON Inc. (AAON) at Sector Weight, arguing that a multiyear surge in artificial intelligence infrastructure spending will continue to drive demand for data center cooling and power equipment.

The report, led by analyst David Tarantino Jr., contends that AI-related investment by hyperscale cloud providers is creating a "stronger for longer" growth environment for data center infrastructure companies, with demand likely extending well beyond current Wall Street expectations.

For investors, the initiation underscores KeyBanc's view that rising AI infrastructure spending is still in its early stages. The firm believes accelerating capital expenditures by cloud providers, growing power requirements and increasingly complex cooling needs will continue to support revenue growth for suppliers of data center equipment into 2027 and beyond.

KeyBanc called Vertiv the "most pure-play" way to invest in the data center infrastructure theme, noting that about 85% of its revenue comes from data centers. The firm said Vertiv's engineering expertise, broad product portfolio and strong market position create a sustainable competitive advantage that should support continued earnings beats and estimate revisions as manufacturing capacity expands.

Although Vertiv already trades at a premium valuation, KeyBanc argued the premium is justified by the company's above-average growth prospects and margin profile. The analysts also believe consensus estimates for 2027 may prove too conservative as demand continues to accelerate.

AAON, by contrast, received a more cautious Sector Weight rating despite what KeyBanc described as an attractive long-term growth story.

The analysts said AAON is well positioned to benefit from demand for customized cooling systems through its BASX business and from continued growth in its traditional commercial HVAC operations. They estimate organic sales could grow at roughly a 26% compound annual rate between 2025 and 2028.

However, KeyBanc said much of that opportunity is already reflected in AAON's valuation. The report also highlighted heavy investment spending on new data center cooling capacity and enterprise software rollouts that could weigh on margin expansion over the next two years.

More broadly, KeyBanc estimates the global market for data center cooling and power infrastructure is worth about $75 billion and expects demand to remain robust as AI servers require significantly more electricity and increasingly sophisticated thermal management systems. The firm projects U.S. data center IT load will continue growing at a roughly 19% annual rate through 2030 while hyperscale capital expenditures continue to climb.

The analysts said concerns that advances in liquid cooling could reduce demand for traditional cooling equipment are overstated, arguing that air cooling will remain an essential part of most liquid-cooled data center designs and should continue to benefit suppliers with broad cooling portfolios.