Key Points
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Data center growth is increasing demand for power, cooling, and other physical infrastructure.
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Vertiv and Argan have entered 2026 with multi-billion dollar backlogs and strong revenue growth.
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The artificial intelligence (AI) spending boom is no longer benefiting just chipmakers or software players. CNBC estimates that Amazon, Microsoft, Alphabet, and Meta Platforms could have nearly $700 billion combined in capital expenditures for 2026, more than 60% above 2025 levels, to expand their AI infrastructure.
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According to Goldman Sachs and Morgan Stanley analysts, AI-related capital spending by U.S. hyperscalers could reach roughly $800 billion in 2026. Morgan Stanley expects it to rise to $1.12 trillion in 2027. A significant portion of that money will be allocated to cooling systems, electrical equipment, and new power plants required for AI facilities.
Vertiv (NYSE: VRT) and Argan (NYSE: AGX) offer two pick-and-shovel plays to invest in this boom. Vertiv supplies power and cooling equipment, while Argan builds power plants.
Vertiv
The company supplies power management, backup power, and air- and liquid-cooling equipment used in data centers.
Demand is already showing up in its results. In the first quarter of fiscal 2026 (ended March 31), revenue rose 30% year over year to $2.6 billion, while adjusted operating margin expanded 4.3 percentage points year over year to 20.8%. Management now expects 2026 revenue of $13.5 billion to $14 billion and adjusted diluted earnings per share of $6.30 to $6.40.
The opportunity is driven not only by the construction of more data centers. AI systems use more high-performance chips in each server rack compared to traditional servers, which increases electricity consumption and heat. This, in turn, raises demand for liquid cooling systems and equipment that can deliver more electricity to each rack.
Vertiv is working with Nvidia on 800-volt direct-current power systems for next-generation AI data centers. Management plans to launch its portfolio in the second half of 2026, aligning with the expected 2027 rollout of Nvidia’s Rubin Ultra platform.
Vertiv entered 2026 with a $15 billion backlog, up 109% year over year and exceeding its projected 2026 revenue. Most of these orders are expected to ship within 12 to 18 months, providing visibility into 2027. However, customers can cancel or reschedule orders.
Valuation remains a challenge. The stock trades for nearly 34.8 times analysts’ expected 2027 earnings. The premium valuation assumes AI infrastructure demand remains strong, margins stay elevated, and the company expands manufacturing capacity without major supply chain or execution problems.
Investors buying Vertiv today are therefore paying not only for strong growth, but also for exceptional execution during the next several years.
Argan
Argan could benefit from the AI infrastructure boom in multiple ways. Its biggest opportunity comes through two subsidiaries, Gemma Power Systems and Atlantic Projects Company, which build, commission, and maintain natural-gas and renewable-power facilities.
Goldman Sachs expects U.S. data-center power demand to more than double from 31 gigawatts in 2025 to 66 gigawatts in 2027. Argan can serve the rising demand for power generation by building natural gas and renewable energy facilities. Natural gas projects accounted for 79% of the company’s backlog at the end of the first quarter of fiscal 2027 (ended April 30). This gives it substantial capacity for power generation that can be tapped when electricity demand rises.
Management’s second opportunity comes through its industrial segment, which has a contract to build about 2,000 pressure vessels for thermal energy storage and chilled water-cooling systems at a customer’s data centers. The company is also building another North Carolina factory to support that contract and pursue more work.
Lastly, another subsidiary, SMC Infrastructure Solutions, gives Argan a smaller potential opportunity through power distribution, fiber optics, communications, and data network projects. However, management has not disclosed a major AI-specific contract for this business.
In the first quarter, revenue increased 50% to $291 million, while net income more than doubled to $46.1 million. The company exited the first quarter with an order backlog of about $2.8 billion. Total cash, cash equivalents, and investments were about $973.6 million, while the company carried no debt.
The stock already prices in strong execution. It’s trading at 39 times forward earnings. However, the order backlog declined from $2.9 billion at the end of January 2026 to $2.8 billion at the end of April.
The company also earns most of its revenue from fixed-price contracts, leaving it exposed to equipment delivery delays, rising labor costs, and other cost overruns. Slower project awards could also make it harder to replace backlog as existing projects are completed.
Argan has several ways to benefit from AI infrastructure spending, but its largest opportunity remains the construction of new power generation capacity. The stock can continue to rise if project awards remain strong and Argan maintains its recent execution pace.
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Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, and Vertiv. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
