GE Vernova Inc. (NYSE:GEV) and Vertiv Holdings Co (NYSE:VRT) made it on Jim Cramer’s radar on October 2nd due to their exposure to the data center industry. Cramer has frequently discussed both firms due to their presence in the data center buildout. For instance, in May, the CNBC TV host remarked that Vertiv had ” the best backlog of any of the data center stocks.” For GE Vernova, he has repeatedly asserted that the firm is in the best possible position to capture any tailwinds to the nuclear power generation industry from the AI buildout. To find out Cramer’s detailed comments about Vertiv, check out Don’t Ignore This Market Rotation: Jim Cramer’s Views on Intel, Vertiv, TSMC, and More. On the 2nd, he discussed both firms after wondering why the jobs report didn’t include details from the data center buildout:
“I thought it was very interesting to look at the employment report. The breakdown of jobs. You still don’t see the data center as being a great, vacuum, of people who have trades and the skills. I wonder sometimes whether that’s because there’s like nil, actual construction, when it comes to commercial in this country. So the commerical guys business is terrible but the websites, the data centers are very, very strong. I think that if you feel that way you could buy a Vertiv or you could buy a GE Vernova which my trust has been buying.”
Looking at Vertiv Holdings Co’s performance, net sales jumped by 24% annually in the second quarter while operating profit grew by a strong 44% to indicate strong data center momentum and satiate the bulls. While it’s difficult to determine the exact nature of this demand since Vertiv does not list revenue by business segment, during the earnings call, CEO Giordano Albertazzi did briefly comment on the data center focus:
“We are delivering data center infrastructure solution at an increasing scale and level of complexity, that is exactly where we want to be. We experienced some minor timing shifts in Q2 revenue, primarily driven by multiphase project execution and temporary supply chain dynamics. But the demand is there and the trajectory is strong. Keep in mind, there are increasingly large projects underway, Think Smartron and think even bigger with 1 core. These come with significant interdependencies, a lot of coordination, a lot of rapid learning, I like the pace of our progress. And we get stronger every day.”
On the bearish front, not only did Vertiv’s 17.8% Q2 revenue growth miss analyst estimates of 23.6%, but the firm outlined that supply chain problems were the reason behind the miss. The miss raised fears about backlog conversion. Additionally, just like Micron is spending heavily to build capacity, Vertiv is also aggressively ramping capital expenditure to meet its backlog. In Q2, the firm’s capex grew by a strong 285% to sit at $173 million. Naturally, the capex growth generates worries about free cash flow yields amidst growing cost competition from regional vendors.
GE Vernova Inc. is a top Jim Cramer stock. As far back as in October 2024, Cramer advised viewers to be “be aware that they are the way that people are playing the power to the data center.” To see how well his recommendations from 2024 have performed, check out Jim Cramer’s Latest Stock Picks – a list that also contains a quantum computing stock. With the shares being up by more than 240% since October 2024, the debate about GE Vernova is whether AI tailwinds can further carry a stock that is trading at a forward P/E of 27.78 more higher.
The firm’s orders, which have got Cramer fired up, led to a $6.4 billion working capital benefit in the second quarter stemming from customer downpayments. These tailwinds led GE Vernova’s free cash flow to jump by an unbelievable 2,532% to sit at $5.1 billion. The firm also bumped its full year cash flow guidance to $11.5 billion to $12.5 billion from the earlier $6.5 billion to $7.5 billion. Yet, with nuclear plants being pricey projects, GE Vernova’s $653 million in Q2 EBIT missed analyst estimates of $981 million and so did the earnings per share.
Shifting towards hedge fund sentiment, 106 funds tracked by Insider Monkey had disclosed a stake in GE Vernova in Q2. The figure sat at 112 for Vertiv. Vernova’s forward P/E ratio of 38.76 implies long term growth expectations, courtesy of the facts that not only is it higher than the standard industrial sector benchmarks but also through a low earnings yield of 2.58%. Short interest as a percentage of float is 3.29% for GE Vernova and 3.68% for Vertiv.
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