Vertiv Holdings (VRT) Declined Due to DeepSeek AI App Launch

Baron Funds, an investment management company, released its “Baron Small Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter of 2025, the fund was down 9.07% (Institutional Shares) compared to the Russell 2000 Growth Index’s (the Index) -11.12% return. Small-cap stocks continued to underperform larger market caps meaningfully, so the Fund lagged the Russell 3000 Index, which fell 4.72% in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Small Cap Fund highlighted stocks such as Vertiv Holdings Co (NYSE:VRT). Vertiv Holdings Co (NYSE:VRT) designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments. The one-month return of Vertiv Holdings Co (NYSE:VRT) was 20.88%, and its shares lost 1.91% of their value over the last 52 weeks. On May 23, 2025, Vertiv Holdings Co (NYSE:VRT) stock closed at $104.14 per share with a market capitalization of $39.69 billion.

Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q1 2025 investor letter:

“Shares of Vertiv Holdings Co (NYSE:VRT), a provider of power, cooling, and infrastructure solutions for data centers, sold off sharply during the quarter after the introduction of the surprisingly efficient DeepSeek AI app raised investor concerns that there would be less need for capital expenditures in the data center industry than projected and, accordingly, would slow Vertiv’s growth rate. In addition, after strong outperformance in 2024, investor concerns that orders could slow in upcoming quarters, as customers go through a digestion period of related spend, caused a revaluation of the entire space. We believe Vertiv maintains its competitive advantage and will benefit from increased capital spend and the complex roadmap related to new chip introductions, which will run hotter and require more advanced cooling solutions. We believe the stock is attractively valued in the context of its long-term growth potential.”

Jim Cramer on Vertiv Holdings (VRT): “I Want to Own the Stock”

A close-up of a group of technicians working on complex data center systems.

Vertiv Holdings Co (NYSE:VRT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 90 hedge fund portfolios held Vertiv Holdings Co (NYSE:VRT) at the end of the first quarter, which was 92 in the previous quarter. While we acknowledge the potential of Vertiv Holdings Co (NYSE:VRT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Vertiv Holdings Co (NYSE:VRT) and shared the list of stocks Jim Cramer talked about. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.