What Happened?

Shares of data center products and services company Vertiv (NYSE:VRT) jumped 5.6% in the afternoon session after stocks rebounded, following a broad-based sell-off the previous day. The Nasdaq was down 4%, while the S&P fell 2.7% as concerns over the ongoing trade war continued to spread. While those concerns haven't exactly disappeared, it's likely some investors looked to take positions in some of the beaten-down stocks, especially some of the high-quality names that got caught up in the sell-off.

After the initial pop the shares cooled down to $81.71, up 4.7% from previous close.

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What The Market Is Telling Us

Vertiv’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was about a month ago when the stock dropped 28.5% as stocks heavily tied to the AI market took a hit after Chinese artificial intelligence startup DeepSeek released a new large language model (DeepSeek-R1) that ranked competitively on key global benchmarks (coding competitions, math evaluation), used less advanced semiconductor chips, was significantly less to build (at $5.5 million - excluding non-compute costs), and already achieved strong adoption after topping the iPhone Store for AI apps. 

Notably, the company also open-sourced this model, a move that might make it harder for rivals to justify huge upfront expenditures on hardware, software, and expertise to develop similar systems. 

Speaking at the World Economic Forum in Davos, Switzerland, Microsoft CEO Satya Nadella praised DeepSeek's efforts, calling the new model "super impressive" for its open-source design, efficient inference-time computing, and high compute efficiency. "We should take the developments out of China very, very seriously," he added. 

Nadella's comments suggested that upstarts like DeepSeek could reshape the competitive landscape of AI. DeepSeek's announcement disrupts long-held assumptions in key ways: 1.) It challenged the narrative that bigger budgets and access to top-tier chips are the only ways forward for AI development. 2.) By using less advanced hardware, DeepSeek opened the door for innovators who face high chip costs or export restrictions, reaffirming they could still compete. 3.) The model's success questioned the growth narrative of companies that develop AI-powered chips and the infrastructure that supports the production and maintenance of these AI tools, including data center servers, and the construction, maintenance, and energy management of these platforms. 

Overall, the news revealed that the market saw more uncertainty in demand as DeepSeek showed that top-tier infrastructure might not be as needed.

Vertiv is down 30.9% since the beginning of the year, and at $81.71 per share, it is trading 46.8% below its 52-week high of $153.49 from January 2025. Investors who bought $1,000 worth of Vertiv’s shares 5 years ago would now be looking at an investment worth $7,672.

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