During the October 2 episode of Mad Money, Jim Cramer discussed SLB N.V. (NYSE:SLB) and its expansion into data-center infrastructure, as he said:
It’s not just traditional tech that benefits from the AI data center boom. All sorts of classic cyclicals have worked their way into the food chain, like Caterpillar and Cummins for power generators, Ford for battery storage. But it goes beyond the industrials. Take SLB, the oil field services colossus, formerly known as Schlumberger. A couple of years ago, they started making modular infrastructure solutions for the data center.
I guess if you can build oil wells in the middle of nowhere, it’s not that much of a stretch to help put up these warehouses full of servers. This business has been growing pretty fast, and it’s about to get bigger because last month, SLB announced a $4 billion acquisition. They’re buying Kelvion. That’s a heat management company… It keeps data centers cool. Consider me intrigued… I think SLB… is a terrific company.
SLB made the cut among the U.S. stocks under $50 most favored by hedge funds, but nine other stocks ranked before the oilfield-services giant on the list.
Cooling Adds to an Existing Data-Center Business
SLB N.V. announced the Kelvion agreement on August 31. The transaction involves approximately $3.4 billion in cash and the assumption of approximately $700 million in debt, putting the total at roughly $4.1 billion. Kelvion supplies thermal-management and heat-exchange technology. Its data-center revenue is expected to reach $1.2 billion – $1.3 billion in 2026. Combined with SLB’s existing business, management projects more than $2 billion in data-center revenue on a pro forma basis this year. That describes the businesses as if combined. It is not revenue SLB has already consolidated. You can read more details of the deal here and why Olivier Le Peuch, Chief Executive Officer, said that it would help SLB expand its “addressable market.”
SLB’s own Data Center Solutions revenue increased 80% year-over-year to $186 million in the second quarter. Although still small relative to approximately $8.97 billion in total quarterly revenue, it gives the company an established operation to expand through the acquisition. The company has been working on advancing its footprint in Venezuela as well.
Oilfield Weakness and Integration Costs Remain Part of the Investment
SLB N.V.’s companywide revenue increased 5% year-over-year, but declined 5% when excluding the acquired ChampionX business. International revenue fell 6% on that same acquisition-adjusted basis. Adjusted EBITDA margin narrowed to 21.2% from 24%, showing that the broader business remained under pressure despite data-center growth. Kelvion will also take time to contribute. The transaction is expected to close in the first half of 2027, subject to approvals and other conditions. Management expects approximately $120 million in annual EBITDA synergies within three years, but those benefits require successful integration and are not guaranteed.
The stock already trades above a major oilfield-services competitor. SLB trades at approximately 17.9x forward earnings, compared with 12.8x for Halliburton. Their geographic and business mixes differ, but the premium means investors are not getting SLB’s expanding industrial exposure at the lowest earnings multiple in the sector.
Fund Interest Expands Along With the New Strategy
According to Insider Monkey, 79 hedge funds held SLB N.V. in the second quarter, up from 74 in the preceding quarter. With 28.9 million shares, First Eagle Investment Management remained the most prominent shareholder of the company among the hedge funds tracked by Insider Monkey. Short interest stood at 4.67% of the public float. Fund participation increased, although the short position indicates that investors are not uniformly convinced.
Cramer has found a new reason to follow SLB beyond oilfield activity. The data-center business is already growing, and Kelvion would add a sizable cooling operation. But shareholders will still own a company whose results depend heavily on energy spending. The acquisition broadens the opportunity without immediately resolving the weakness in its existing business.
READ NEXT: Jim Cramer Weighs FICO’s 50% Slide as Its Scoring Dominance Faces a Test and Jim Cramer Remains Wary of AppLovin (APP) Despite Its 44% Decline.
