Why data-center cooling stocks dropped fast after Nvidia CEO Jensen Huang spoke at CES - here's the breakdown

Core Viewpoint - Shares of cooling system manufacturers for data centers experienced significant declines following comments from Nvidia CEO Jensen Huang regarding the potential reduced need for traditional water chillers due to the capabilities of Nvidia's next-generation Rubin chips [1][10]. Group 1: Stock Performance - Trane Technologies Plc's stock fell as much as 11%, marking its steepest intraday drop since 2020 [1][12]. - Modine Manufacturing Co's stock dropped by 21% [1][12]. - Johnson Controls International Plc and Carrier Global Corp also saw notable declines amid the selloff [1][12]. Group 2: Technological Implications - Huang indicated that Nvidia's Rubin chips can be cooled using water at higher temperatures, potentially eliminating the need for traditional water chillers [2][10]. - Bloomberg Intelligence highlighted that chillers are a "predominant" component of data-center cooling equipment [2]. Group 3: Market Reactions and Analyst Insights - Analyst Timothy Wojs from Robert W. Baird expressed concerns about the long-term positioning of chillers in data centers as liquid cooling becomes more prevalent [3][4]. - Wojs does not foresee major risks to near-term estimates for cooling-system makers but anticipates potential order concerns later in 2026 [6]. - Citi analyst Andrew Kaplowitz described the stock decline as "overdone," emphasizing the established relationships between cooling-system manufacturers and chipmakers [8][13]. - Barclays analyst Julian Mitchell noted that Vertiv, which has a strong position in liquid cooling, may benefit from the changes discussed by Huang, despite potential headwinds for its chiller business [9][13].