Deutsche Bank bet on an AI stock that soared 1,600% in three years
The bank conceded that even its most optimistic outlook may not be bullish enough
Data center technology provider Vertiv has been one of the main beneficiaries of the artificial intelligence boom. But Deutsche Bank believes investors who missed out on the stock's rally of more than 1,600% over the past three years can still participate - though not on the same scale.
Details
Shares of Vertiv (formerly Emerson Network Power) now look expensive when looking at its forward P/E ratio, but another indicator - the share price to earnings growth (PEG) ratio - shows that Vertiv's stock valuation is actually below most peers, according to Deutsche Bank analyst Nicole Deblaze. According to her calculations, Vertiv's PEG ratio puts it in the bottom quartile of its peers in the multi-industry and electrical sector, which means it's relatively cheap, MarketWatch writes.
Deblaze raised its target price for the shares from $168 to $216, suggesting a 20% upside potential. In the case of a more optimistic scenario, they could rise to $230 - 27% above the current level, the Deutsche Bank analyst said. At the same time, she did not rule out that even this option may not be bullish enough if announcements of major projects in the field of artificial intelligence continue.
Context
Morgan Stanley estimates that leading technology companies including Alphabet, Amazon, Meta, Microsoft and CoreWeave plan to spend $400 billion on infrastructure for neural networks this year.
OpenAI, a startup playing a key role in the AI boom, has in recent weeks entered into strategic agreements with leading chip makers Nvidia, AMD and Broadcom. The total estimated investment under these contracts could exceed $1 trillion. The deals are aimed at acquiring 26 gigawatts of computing power, which is comparable to the energy consumption of 20 million U.S. households, Reuters reports.
Meta Platforms is building multi-gigawatt data centers for AI, including the Prometheus project, due to launch in 2026, and Hyperion, whose capacity could be expanded to 5 gigawatts.
The latest in a series of such large deals was the purchase of one of the world's largest data center operators, Aligned Data Centers, for $40 billion. The acquisition was made by a group of investors including Nvidia, Microsoft and BlackRock.
This article was AI-translated and verified by a human editor
