As data centers become larger and more power-hungry, companies need far more than servers and chips. They need equipment to deliver electricity, manage heat, and keep everything running reliably. That has put Vertiv Holdings Co (NYSE:VRT) and Eaton Corporation plc (NYSE:ETN) in an interesting position.
Both companies are benefiting from the same underlying trend, but they offer investors very different ways to play it. Eaton is a broad electrical infrastructure company, while Vertiv is much more directly tied to data centers and the power and cooling systems inside them.
The question is whether Vertiv’s faster growth is worth choosing over Eaton’s more diversified business.
DON’T MISS: Will Vertiv Holdings (VRT)’s $1.45 Billion UIG Deal Accelerate its AI Infrastructure Growth?
Vertiv is becoming more than a cooling company
Vertiv Holdings Co’s latest results show how quickly demand is building. Second-quarter revenue rose 24% year over year to $3.27 billion, while adjusted operating profit increased 51%. Management also pointed to strong demand from AI and high-performance computing and said customers are increasingly looking for infrastructure that can handle much higher power densities.
That is pushing Vertiv into some interesting territory. The company is developing 800-volt DC power architectures for next-generation AI facilities and is already working with NVIDIA on data centers using its latest-generation systems. Management expects some of these newer architectures to move from customer validation into deployment over the next few years.
Cooling is evolving too. As AI racks become hotter and more densely packed, liquid cooling is becoming increasingly important. Vertiv is building out its thermal-management business and services around it, giving customers more of the infrastructure they need from a single provider.
That could be an important part of Vertiv’s moat. Its advantage isn’t simply selling a power system or cooling unit. It is increasingly becoming a partner that helps customers solve the entire infrastructure problem.
Eaton brings a different kind of strength
Eaton doesn’t offer the same pure-play exposure to AI data centers. Its electrical business is much broader, serving data centers alongside industrial, commercial, and other customers.
That diversification has not stopped Eaton from benefiting from the AI buildout. Its Electrical Global business saw second-quarter sales rise 44%, while backlog more than doubled from a year earlier. Management specifically cited strength in data centers among the drivers of demand.
This gives Eaton Corporation plc (NYSE:ETN) a different kind of moat. Its extensive electrical infrastructure business, established customer relationships, and scale make it difficult to displace. And unlike Vertiv, Eaton doesn’t need AI to remain the only source of growth.
READ ALSO: Could Eaton Corporation (ETN)’s $242 Million Expansion Power its Next Data Center Growth Phase?
But the valuation changes the equation
Vertiv trades at about 27.8x forward earnings, a negligible discount to Eaton’s 27.6x. The growth outlook, however, is very different. Wall Street expects Vertiv’s earnings to jump from $4.20 per share last year to $6.72 this year and $9.19 in 2027, representing another 37% increase after a 60% jump this year. Eaton’s earnings are expected to grow at a much more measured pace of low double digits.
That means investors aren’t paying a substantially higher earnings multiple for Vertiv’s much faster expected growth.
There is a catch. Vertiv’s closer connection to AI data-center spending also makes it more exposed if hyperscalers slow their infrastructure investments. Eaton’s broader business provides a cushion that Vertiv doesn’t have.
Conclusion
Vertiv appears to be the better stock at current valuations. Eaton has the more diversified business and a formidable position in electrical infrastructure, but investors are paying roughly the same forward multiple for much slower expected earnings growth.
Vertiv, meanwhile, is positioned directly at the intersection of AI, power, and cooling, while expanding its role as data centers become more complicated.
The biggest risk is that the market is already expecting rapid growth to continue. But at roughly the same valuation as Eaton, Vertiv seems to offer the more compelling combination of growth and AI exposure.
Market sentiment
Market sentiment toward Vertiv appears to be strengthening. The number of hedge funds holding the stock in Insider Monkey’s database increased from 96 at the end of Q1 to 112 at the end of Q2 2026. Meanwhile, the total value of their positions rose slightly from about $6.60 billion to $6.69 billion.
Eaton, meanwhile, saw institutional interest move in the opposite direction. The number of hedge funds holding the stock fell from 73 to 68, while the total value of their positions increased from about $3.14 billion to $3.44 billion over the same period.
READ NEXT: Micron vs. Sandisk: Which AI Memory Stock Is the Better Buy? OR Palantir Reveals Its AI Sovereignty Strategy And Wall Street Is Starting to Believe It
This article is originally published at Insider Monkey.
