February 13, 2026 05:30 AM GMT Capital Goods | Europe 800vDC Data center - First Inning: What we have heard so far from the Electrical suppliers Since we first wrote in September, investor interest around the shift to 800vDC data center architecture has clearly intensified. Post 4Q25, we assess the latest developments across cap goods suppliers. Delta and Eaton still lead globally, while there is more debate on positioning of EU suppliers We have been early on the 800vDC topic. first writing it in Sep-2025 ...

Industry Overview - The artificial intelligence (AI) sector, bolstered by the rapid growth of cloud computing and data centers, is experiencing a robust demand scenario, particularly for AI-powered data center capacity to manage and store vast amounts of data [1] - The "magnificent 7" stocks are set to invest $650 billion in 2026 for AI infrastructure development, representing a significant 71.1% year-over-year increase in capital spending on the AI ecosystem [2] Company Insights Amphenol Corp. (APH) - Amphenol holds a Zacks Rank 2 and benefits from a diversified business model, commanding an estimated 33% market share in AI-powered data center interconnects [7] - The company is experiencing triple-digit organic growth in its IT datacom segment, driven by high-speed and power interconnect products [8] - Amphenol's expected revenue and earnings growth rates for the current year are 34.9% and 29.3%, respectively, with a 1.9% improvement in the earnings consensus estimate over the last 30 days [12] Western Digital Corp. (WDC) - Western Digital, with a Zacks Rank 1, is witnessing strong demand for high-capacity hard disk drives (HDD) amid intensified cloud and AI demand [13] - The company is collaborating closely with hyperscale customers to deliver reliable, high-capacity storage solutions, with an expected revenue growth rate of -6.3% and earnings growth rate of 81.7% for the current year [16] Vertiv Holdings Co. (VRT) - Vertiv, holding a Zacks Rank 2, benefits from a diverse product portfolio and is strategically expanding capacity to support AI-enabled pipelines [17] - The company has a partnership with NVIDIA to co-develop an 800-volt DC power architecture, ensuring its infrastructure solutions remain relevant as power requirements scale [19] - Vertiv's expected revenue and earnings growth rates for the current year are 34% and 46.9%, respectively, with a 15.3% improvement in the earnings consensus estimate over the last 30 days [20] Lumentum Holdings Inc. (LITE) - Lumentum, with a Zacks Rank 1, designs and manufactures optical technologies essential for AI and cloud computing, experiencing significant revenue growth driven by demand for AI infrastructure connectivity solutions [21][22] - The company has a strong collaboration with NVIDIA for developing silicon photonics, positioning it as a key supplier to hyperscale customers [23] - Lumentum's expected revenue and earnings growth rates for the current year are 76.7% and over 100%, respectively, with a 34.6% improvement in the earnings consensus estimate over the last 30 days [24] EMCOR Group Inc. (EME) - EMCOR, holding a Zacks Rank 2, is a leading provider of critical infrastructure to AI-powered data centers, focusing on electrical infrastructure and cooling systems [25] - The company is gaining traction in the data center construction market, which is contributing to its expanding remaining performance obligations (RPOs) [26] - EMCOR's expected revenue and earnings growth rates for the current year are 5.4% and 8.6%, respectively, with a slight improvement in the earnings consensus estimate over the last 30 days [28]

A Boeing 737 Southwest Airlines passenger aircraft pictured at LaGuardia Airport in New York on Feb. 22, 2026. Boeing and Vertiv were among the top stocks bought by hedge and mutual-fund managers so far this year. - Charly Triballeau/Agence France-Presse/Getty Images Industrials, financials and a solidly-performing AI pick and shovel made up a handful of companies that mutual funds and hedge funds have been in lockstep agreement on in early 2026. That’s according to Goldman Sachs strategists, who analyze ...

Core Viewpoint - Vertiv (NYSE: VRT) is positioned as a key player in the AI data center infrastructure market, experiencing significant stock growth following strong earnings results, making it a potential investment opportunity [1]. Group 1: Investment Opportunities - Vertiv is well-positioned to capitalize on the long-term trend in data center construction driven by increased AI usage, as hyperscalers expand their capacity to meet rising demand [2]. - The company is collaborating with Nvidia to develop 800V DC power architectures, aligning with Nvidia's upcoming Rubin Ultra platforms, which enhances its role in the AI ecosystem [3]. - Vertiv has launched the Vertiv OneCore prefabricated modular data centers, which integrate various components into a unified system, allowing for faster deployment to meet market demands [4]. - The company reported a 252% year-over-year growth in organic orders in the fourth quarter, leading to a backlog of $15 billion, more than double from the previous year, indicating strong demand for its products [5]. - Vertiv's book-to-bill ratio stands at 2.9, suggesting that demand significantly exceeds current revenue recognition [5]. Group 2: Investment Risks - Despite the growth potential, there are risks related to high valuation expectations and potential technological shifts that could impact current hardware needs [6]. - The stock is considered expensive, trading at 72.3 times its trailing-12-month earnings per share, which raises concerns about its valuation [7]. - Analysts project a 44% increase in non-GAAP earnings per share to $5.99 in 2026, followed by a 33% increase to $8.01 in 2027, indicating strong growth expectations but also highlighting the high valuation risk [7].

Group 1: Datadog - Datadog is an artificial intelligence-powered observability and security platform, with a buy rating and a price target of $180 from Baird analyst William Power [3][6] - The company aims for an adjusted operating margin of over 25%, balancing future growth and near-term profitability [3] - Datadog has solid demand for its products and significant opportunities in AI, logs, developer tools, and security, with 8,500 security customers [4][5] - Security currently represents only 2% of total annual recurring revenue (ARR) from large customers, indicating a vast expansion opportunity [5] Group 2: Vertiv Holdings - Vertiv Holdings provides power and cooling solutions to data centers, reporting a 252% surge in organic orders for Q4 2025 [7][8] - Bank of America analyst Andrew Obin reiterated a buy rating and raised the price target to $277, expecting strong order momentum to continue in 2026 [7][8] - Obin projects 2026 orders to grow by 5% to $18.6 billion, which would add $5 billion to backlog, reflecting a 33% year-over-year increase [9] - Key trends from Vertiv's 10-K filing include strengthening services capabilities and strategic deals with Nvidia and Caterpillar [10] Group 3: Arista Networks - Arista Networks provides networking solutions for AI and data center environments, delivering strong Q4 results and guidance [12] - Following Nvidia's deal with Meta Platforms, Needham analyst Ryan Koontz reiterated a buy rating with a price target of $185, emphasizing minimal impact on Arista's supplier position [13][14] - Meta accounted for 16% of Arista's 2025 revenue, and Koontz views Arista as a dominant supplier for Meta's AI applications [14] - The announcement regarding Nvidia's networking sales to Meta does not reflect new developments in networking, according to Koontz [16]

Economic Overview - Global GDP growth is projected at 2.7–2.8% for 2026, below pre-COVID averages, with advanced economies growing modestly and Asia-Pacific, particularly India, showing resilience with a growth rate of approximately 6.6% [1] - The IMF forecasts advanced economies to grow around 1.8%, while emerging markets and developing economies are expected to exceed 4% growth in 2026, indicating a widening economic gap [2] Market Polarization - Equity markets are experiencing polarization, driven by significant capital flows into megatrends such as AI investment, clean energy, and healthcare [3] - Artificial intelligence investment is identified as the primary driver of market polarization in 2026, with major technology companies significantly increasing capital expenditures [4] AI Investment - Major technology firms, including Amazon, Alphabet, Microsoft, and Meta, are projected to spend approximately $650 billion on AI-related infrastructure in 2026, marking a 67% increase from 2025 [5] - Semiconductor foundries are expanding, with Taiwan Semiconductor (TSM) raising its 2026 capex target to $52-$56 billion, reflecting strong demand for AI [7] Sector Analysis AI & Technology Infrastructure - Companies involved in AI infrastructure, such as NVIDIA (NVDA) and Vertiv Holdings (VRT), are positioned to benefit from the AI capital-expenditure cycle, with NVDA expected to report earnings growth of 57.7% in fiscal 2027 and VRT projected to grow earnings by 46.9% in 2026 [9] Renewable Energy & Battery Materials - The energy transition is accelerating, with Albemarle (ALB) expected to benefit from rising lithium demand linked to electric vehicles and stationary storage, projecting an earnings growth of 855.7% in 2026 [10] Healthcare & Biotech - The healthcare sector is supported by demographic trends and technological innovations, with Axsome Therapeutics (AXSM) expected to achieve 109% earnings growth in 2026, driven by advancements in AI-assisted drug discovery [11]

Core Insights - Artificial intelligence is driving significant growth in data center construction, with cooling becoming a critical challenge that impacts expansion speed [1] - Modine Manufacturing (MOD) is strategically positioned to capitalize on this trend, with record orders and plans for aggressive capacity expansion that could reshape its earnings over the next five years [2] Data Center Growth - Modine's data center sales increased by 31% sequentially in fiscal Q3 2026, with expectations for revenues exceeding $400 million in the fourth quarter [3] - The company has a record order book, with a five-year visibility on engagements increasingly structured around long-term supply agreements [4] Cooling Capacity Demand - For hyperscalers, securing cooling capacity is now as crucial as securing power, with production slots and delivery timelines gaining importance alongside technology performance [5] - Management projects annual growth of 50-70% in the data center business over the next two fiscal years, with capacity to support this growth expected by the end of fiscal 2027 [6] Expansion of Product Offerings - Modine is expanding its Climate Solutions portfolio beyond core cooling, having acquired several companies to enhance capabilities in heating, ventilation, and air handling [7][8] - The company is targeting the commissioning of eight chiller lines by fiscal year-end, with a long-term goal of approximately 20 lines by early fiscal 2028, representing a 125% cumulative capacity expansion [9][10] Competitive Landscape - Modine operates in a competitive environment alongside established players like Vertiv and Johnson Controls, both of which have strong positions in AI-driven data center cooling [12] - Vertiv benefits from deep relationships with hyperscalers and offers integrated thermal management solutions, while Johnson Controls provides a broad range of HVAC and building solutions [13][14] Future Outlook - Modine's aggressive scaling aims to capture the growing demand for AI-driven data center cooling, supported by multi-year visibility and expanding capacity [15] - The long-term expected EPS growth rate for Modine is projected at 34% [15]

Core Insights - Modine Manufacturing (MOD) is undergoing a significant transformation, focusing on Climate Solutions driven by increasing data center demand and a strategic portfolio simplification [1][9] Group 1: Portfolio Transformation - Modine's business mix is shifting towards Climate Solutions, with data center cooling identified as a primary growth driver, expecting 50% to 70% annual growth over the next two fiscal years [2] - The Climate Solutions segment is targeting margins of 20% to 23% for the next fiscal year, with expectations of reaching 20% to 21% margins by the fourth quarter of fiscal 2026, indicating an improvement in both mix and scale [3] Group 2: Separation of Performance Technologies - Modine plans to separate its Performance Technologies business through a Reverse Morris Trust transaction with Gentherm, expected to close in the fourth quarter of calendar 2026 [4] - This separation aims to position Modine as a pure-play Climate Solutions company, focusing on data centers, commercial HVAC, and refrigeration, while reducing exposure to cyclical automotive markets [5] Group 3: Strategic Acquisitions - In fiscal 2026, Modine has made acquisitions including AbsolutAire, L.B. White, and Climate by Design International, enhancing its HVAC and critical air capabilities [6] Group 4: Future Reporting Segments - Starting in fiscal 2027, Modine will report three segments: Data Centers, Commercial HVAC, and Performance Technologies (until the deal closes), leading to a cleaner portfolio and stronger margin potential [7] Group 5: Competitive Landscape - Modine competes with larger players like Trane Technologies and Vertiv Holdings within the Climate Solutions sector, with Trane focusing on commercial buildings and sustainability, while Vertiv aligns closely with data center infrastructure [8][10] Group 6: Long-term Outlook - Modine's transformation is expected to enhance its focus on high-growth, high-margin Climate Solutions markets, particularly in data center cooling, potentially leading to a stronger earnings profile over time [11]

The company is leaning heavily into AI. Its $1 billion acquisition of PurgeRite, a specialist in fluid-purging and coolant services for high-density data centers, strengthens Vertiv’s liquid-cooling capabilities, key for powering AI server farms. On the innovation front, last year, Vertiv partnered with Nvidia under the DOE’s COOLERCHIPS program to co-design an 800-volt DC power and cooling system for next-generation AI chips. CEO Alberto Albertazzi said, “We have combined our leadership in power and coolin ...

Group 1: Company Insights - Cadence Design Systems Inc reported strong revenue growth, driven by increased demand for electronic design automation tools, with a year-over-year increase of 15% [1] - Amazon.com Inc continues to dominate the e-commerce sector, showing resilience despite economic challenges, with a reported revenue of $121 billion in the last quarter, reflecting a 9% increase year-over-year [1] - Arista Networks has seen a significant rise in its market share, attributed to its innovative cloud networking solutions, with a revenue growth of 20% compared to the previous year [1] Group 2: Industry Trends - The electronic design automation industry is experiencing robust growth, fueled by advancements in technology and increased investment in semiconductor manufacturing [1] - The e-commerce industry remains strong, with companies adapting to changing consumer behaviors and leveraging technology to enhance customer experience [1] - The cloud networking market is expanding rapidly, driven by the increasing demand for scalable and efficient networking solutions in various sectors [1]