Summary of Key Points from the Conference Call Industry Overview - The discussion centers around the HVAC (Heating, Ventilation, and Air Conditioning) industry and liquid cooling technologies, particularly in relation to NVIDIA's new Vera Rubin chip platform [1][2]. Core Insights 1. **Advancements in Liquid Cooling**: NVIDIA's CEO announced that the new Vera Rubin chips can be cooled using liquid cooling systems instead of traditional water chillers, which has implications for HVAC OEMs [1]. 2. **Market Reaction**: Following the announcement, HVAC OEMs such as Johnson Controls (JCI), Trane Technologies (TT), and Carrier Global (CARR) experienced a sell-off, while liquid cooling companies like nVent Electric (NVT) and Vertiv (VRT) saw modest gains [1]. 3. **Continued Need for Traditional Chillers**: Despite the advancements, traditional chillers remain essential for cooling data centers, especially during peak temperature days, indicating that the sell-off of HVAC OEMs may have been unwarranted [2]. 4. **Collaboration with Chip Manufacturers**: HVAC OEMs are actively collaborating with chip manufacturers on next-generation technology roadmaps, exemplified by TT's partnership with NVIDIA on a thermal management system for AI infrastructure [2]. 5. **Future of Liquid Cooling**: The need for advanced liquid cooling technologies is expected to grow as next-generation chips will have significantly higher compute capacities, necessitating continued innovation in cooling solutions [2]. 6. **Two-Phase Cooling Adoption**: The CES announcement may accelerate the adoption of two-phase cooling technologies, which are anticipated to be more energy-efficient than current single-phase systems [2]. 7. **Investment Activity**: JCI's investment of approximately $25 million in Accelsius, a leader in dual-phase cooling, highlights the industry's shift towards more advanced cooling solutions [2]. Additional Considerations 1. **Short-Term Market Volatility**: The industry has seen several short-term sell-offs due to new technology developments, which have historically provided "buy the dip" opportunities for investors [2][6]. 2. **Earnings Outlook**: The upcoming 4Q earnings reports are expected to address the resilience and growth potential of both HVAC OEMs and liquid cooling companies, which could influence market sentiment [2]. 3. **Valuation and Risks**: - nVent Electric (NVT) is rated as a Buy with a 12-month price target of $145, based on a multiple of 21.0x EBITDA [10]. - Vertiv (VRT) is also rated as a Buy with a price target of $204, based on a multiple of 23x EBITDA [11]. - Carrier Global (CARR) and Johnson Controls (JCI) are rated as Buy with price targets of $68 and $137, respectively, while Trane Technologies (TT) is rated Neutral with a price target of $458 [13][15][16]. Conclusion - The developments at CES 2026 signal a transformative period for the HVAC and liquid cooling industries, with significant implications for market dynamics and investment opportunities. The ongoing collaboration between HVAC OEMs and chip manufacturers, along with advancements in cooling technologies, will be critical in shaping the future landscape of the industry [2].

Core Viewpoint - Trane Technologies plc is a leader in climate innovation, focusing on sustainable solutions for buildings, homes, and transportation, competing with major players like Carrier Global Corporation and Johnson Controls International [1] Stock Performance and Analyst Ratings - On January 7, 2026, Scott Davis from Melius Research set a price target of $490 for Trane Technologies, indicating a potential upside of 28.58% from the current trading price of $381.10 [2][5] - The stock recently opened at $367.12 following a downgrade by UBS Group, which lowered its price target from $544 to $520 but maintained a buy rating [2] - The stock last traded at $362.73 with a trading volume of 462,873 shares, and other analysts have also provided updated views on the stock [3] - The Royal Bank of Canada increased its price target from $467 to $469, maintaining a "sector perform" rating, while Bank of America upgraded the stock from "neutral" to "buy," raising its target price from $490 to $550 [3] - Barclays adjusted its price target from $485 to $495, giving it an "overweight" rating [3][5] Current Stock Metrics - Trane Technologies' current price of $381.10 reflects a decrease of 2.52% or $9.87, with intraday fluctuations between a low of $348.06 and a high of $383.26 [4] - Over the past year, the stock has reached a high of $476.19 and a low of $298.15, with a market capitalization of approximately $84.5 billion and a trading volume of 4,318,000 shares on the NYSE [4]

Core Viewpoint - Nvidia CEO Jensen Huang's remarks at CES 2026 have significantly impacted the stock market, leading to a surge in storage-related stocks while causing declines in data center cooling stocks [1][2]. Group 1: Storage Stocks Surge - SanDisk's stock price soared nearly 28% to $349.63 per share, reaching a market cap of $51.24 billion, marking a tenfold increase since February of the previous year [2][4]. - Huang emphasized the untapped potential of the storage market, predicting it could become the largest global storage market to support AI workloads, with current demand exceeding existing infrastructure capabilities [4]. - Other storage companies like Western Digital, Seagate, and Micron also saw significant stock price increases, with Western Digital up 16.77% to $219.38, Seagate up 14% to $330.42, and Micron up 10% to $343.43, all achieving double-digit percentage gains [6][7]. Group 2: AI-Driven Hardware Spending - The growth in AI training and inference demand is leading to tight memory supply and rising prices, boosting digital storage stocks [12]. - Analysts predict that companies will retain more data for training, analysis, and compliance, driving a surge in storage demand, particularly in sectors like drones, surveillance, and automotive technology [14]. - The focus on AI investment has shifted towards hardware spending, with expectations that AI inference will dominate beyond 2026 [14]. Group 3: Cooling Stocks Decline - Huang's comments raised concerns about the demand for data center cooling products, leading to declines in cooling-related stocks [15]. - Johnson Controls' stock fell 6.24%, Modine Manufacturing dropped 7.46%, and Trane Technologies decreased by 2.52%, with significant intraday losses [15][19]. - Analysts noted that the shift towards liquid cooling technology could impact traditional cooling systems, although some believe the recent sell-off may be excessive [21].

Market Performance - On January 6, US stock indices rose across the board, with the Dow Jones Industrial Average and S&P 500 both reaching record closing highs [1][2] - The Dow Jones increased by 0.99%, closing at 49,462.08 points, while the S&P 500 and Nasdaq Composite rose by 0.62% and 0.65%, closing at 6,944.82 points and 23,547.17 points respectively [1][2] Sector Performance - In the technology sector, large tech stocks showed mixed performance; Amazon surged over 3%, while Microsoft and Intel both gained over 1% [2][4] - Conversely, Tesla led the decline with a drop of over 4%, and Apple fell by more than 1% [2][4] Storage Sector - The storage sector experienced a significant rally, driven by comments from NVIDIA CEO Jensen Huang at CES 2026 regarding "AI storage transformation" [4][6] - Micron Technology saw an increase of over 10%, while SanDisk surged by more than 27%, and Western Digital and Seagate Technologies recorded gains of over 16% and 14% respectively [4][6] Data Center Cooling Sector - In contrast, the data center cooling sector faced declines, with Johnson Controls dropping over 6% and Trane Technologies falling by more than 2% [6] - The announcement regarding new server rack capabilities that do not require water cooling contributed to this downturn [6] Chinese Stocks - The Nasdaq Golden Dragon China Index fell by 0.78%, closing at 7,836.43 points, with most popular Chinese stocks declining [8][9] - Notable movements included Hesai rising over 10% and Xiaoma Zhixing increasing by more than 5%, while BOSS Zhipin and Tencent Music dropped over 6% and 4% respectively [8]

Core Viewpoint - Nvidia's CEO Jensen Huang's comments on the next-generation Rubin chip's cooling technology have raised concerns among investors regarding the demand for data center cooling equipment, leading to a significant drop in related stocks [2][3][5]. Group 1: Impact on Cooling Equipment Stocks - Nvidia's announcement that servers with the Rubin chip will utilize liquid cooling instead of traditional chillers has caused a sell-off in cooling equipment stocks, with Johnson Controls experiencing an 11% drop, marking its largest intraday decline since 2022 [2][3]. - Modine Manufacturing's stock fell by approximately 21% before recovering to a 7.44% decline, while Trane Technologies also saw a decrease [2][3]. - Analysts are reassessing the investment logic surrounding AI infrastructure, as companies like Johnson Controls saw a 52% cumulative increase in stock price since last year due to the AI boom [5]. Group 2: Analyst Insights - Analyst Timothy Wojs from Baird highlighted that Huang's comments have raised questions about the long-term role of chillers in data centers, especially with the increasing adoption of liquid cooling technology, which allows systems to operate at higher temperatures [6]. - Barclays analyst Julian Mitchell noted that while Vertiv holds a strong position in the liquid cooling sector and may benefit from the discussed technological advancements, its cooling business could face challenges [6]. - Citi analyst Andrew Kaplowitz described the sell-off in cooling stocks as "overdone," emphasizing that cooling system manufacturers have established partnerships with chip makers and data center operators, making the risks manageable [10]. Group 3: Market Reactions - Huang's statements have also spurred a surge in data storage stocks, with SanDisk's stock rising over 27%, becoming the best performer in the S&P 500 on that day, as demand for memory and storage was highlighted [10].

Core Viewpoint - The cooling systems manufacturers experienced significant stock declines following comments from Nvidia's CEO regarding reduced demand for their products in data centers [1][2]. Group 1: Stock Performance - Johnson Controls International Plc (JCI) saw its shares drop as much as 11%, marking the worst intraday decline since 2022 [1]. - Modine Manufacturing Co. (MOD) experienced a more severe decline, with shares falling as much as 21% [1]. - Carrier Global Corp. (CARR) and Trane Technologies Plc (TT) also faced stock price reductions, although specific percentages were not provided [1]. Group 2: Nvidia's Comments - Nvidia's CEO Jensen Huang indicated that their next-generation Rubin chips could cool racks using water at temperatures that do not necessitate a water chiller [2]. - Barclays analyst Julian Mitchell emphasized the importance of Nvidia's comments, suggesting that they should not be dismissed lightly due to Nvidia's central role in the AI ecosystem [2].

Core Viewpoint - Trane Technologies plc (TT) shares experienced a significant decline of 4.22 percent, dropping $16.51 to $374.46, with no specific news to explain the movement [1]. Group 1: Stock Performance - The stock was last trading at $374.46, down from a previous close of $390.97 [1]. - Shares opened at $395.30 but faced selling pressure, reaching a day's low of $348.06 on the New York Stock Exchange [1]. - Trading volume was approximately 2.56 million shares, exceeding the average daily volume of about 1.23 million shares [1]. Group 2: Historical Trading Range - Trane Technologies has traded within a 52-week range of $298.15 to $476.19 [2].

Core Viewpoint - Concerns over the demand for data center cooling products have been raised following comments from NVIDIA's CEO, leading to significant stock declines for cooling system manufacturers [1] Group 1: Stock Performance - Johnson Controls, a manufacturer of water cooling equipment, saw its stock drop by 11%, marking the largest intraday decline since 2022 [1] - Modine experienced a stock decrease of 21% [1] - Other companies such as Carrier Global and Trane Technologies also faced declines in their stock prices [1] Group 2: Industry Impact - NVIDIA's CEO Jensen Huang suggested that cooling for racks equipped with the next-generation Rubin chip could be achieved without traditional chiller units [1] - Barclays analyst Julian Mitchell emphasized the importance of NVIDIA's statements due to the company's central role in the AI ecosystem, indicating that their comments should not be underestimated [1]

Core Viewpoint - The cooling stocks for data centers experienced a significant decline following Jensen Huang's comments regarding data center cooling solutions at the CES event, indicating a potential shift in technology that could impact the market dynamics for these companies [1] Group 1: Market Reaction - Data center cooling stocks collectively dropped, with Johnson Controls and Trane Technologies falling by 10% at one point [1] - Modine experienced a decline of up to 20% [1] - Carrier and Vertiv Technologies saw declines exceeding 5% [1] Group 2: Technological Implications - Jensen Huang stated that servers equipped with the new Rubin chip could utilize cooling methods that do not require water, suggesting a significant change in cooling technology [1] - The airflow requirements for the new Rubin chip servers are comparable to those of the existing Blackwell chip servers, indicating a potential for reduced cooling costs and infrastructure changes [1]

Core Viewpoint - Data center cooling stocks experienced a significant decline, with major companies like Modin Manufacturing, Johnson Controls, Trane Technologies, and Vertiv Technologies facing substantial drops in their stock prices following comments made by Jensen Huang at the CES event regarding new cooling technologies [1] Group 1: Stock Performance - Modin Manufacturing (MOD.US) saw a drop of over 13% [1] - Johnson Controls (JCI.US) and Trane Technologies (TT.US) both fell by more than 7% [1] - Vertiv Technologies (VRT.US) experienced a decline of over 3% [1] Group 2: Technological Developments - Jensen Huang announced that servers equipped with the new Rubin chip will be able to operate without water cooling, requiring airflow comparable to that of racks using the Blackwell chip [1]