Source: Fortune
Summary
Vertiv, an 80-year-old company, saw its market cap grow nearly 10x since going public in 2021, with a 50.5% annualized return. David Cote, a retired industrialist, led its transformation by pivoting to AI-focused cooling technology. Vertiv acquired CoolTera to develop direct-to-chip liquid cooling, which became critical for data centers. The company expanded production and now competes with major players like Schneider Electric and Eaton. Cote emphasized operational efficiency and employee input, aligning with his past strategies at Honeywell.
Our Reading
The numbers tell one story.
Vertiv’s stock rose 10x since 2021, driven by AI cooling tech.
Cote, a former Honeywell CEO, led the shift to liquid cooling.
Vertiv now competes with big names in data center cooling.
The company’s growth is tied to the digital age’s long-term trends.
Author: Evan Null
Cote wanted a place at the center of the digital age, but Vertiv got off to a rocky start
David Cote, a retired industrialist, found Vertiv, an 80-year-old AC maker, and saw potential in its data center cooling business. He bought the company in 2020 through a SPAC, but the stock dropped during the pandemic. Vertiv struggled with pricing and competition, leading to a 55% drop in its stock price by 2023. Cote then brought in a new CEO to fix operations.
Cote’s approach was rooted in his experience at Honeywell, where he emphasized operational efficiency and employee input. He believed Vertiv could become a key player in the data center cooling market. Despite early setbacks, he remained confident in the long-term potential of the digital age.
Vertiv’s transformation began with a focus on R&D and new technologies. The company partnered with Nvidia and acquired CoolTera to develop direct-to-chip cooling, a breakthrough that improved data center efficiency. This move positioned Vertiv as a leader in a growing market.
Despite challenges, Cote’s vision for Vertiv aligned with the rising demand for AI infrastructure. The company’s focus on innovation and operational excellence helped it recover and grow, even as it faced competition from larger firms.
Cote’s leadership style, which emphasized listening to employees and continuous improvement, played a key role in Vertiv’s success. His belief in the long-term value of the digital age drove the company’s strategic decisions, even as it navigated the complexities of the AI boom.
Vertiv adopted an all-new cooling technology from the outside—via acquisition
Vertiv’s shift to direct-to-chip (DTC) cooling technology was a game-changer. The company partnered with a British startup, CoolTera, to develop this innovative cooling system. DTC uses a water and glycolic compound to cool GPUs directly, improving efficiency and reducing data center space requirements. This technology became essential for handling the heat generated by high-performance AI hardware.
The acquisition of CoolTera in 2023 marked a significant step in Vertiv’s strategy. Before the acquisition, the technology was still in the prototype stage. Vertiv commercialized it, making it a key product for data centers. The company expanded production to meet growing demand, building new facilities and increasing capacity.
Vertiv now competes with major players in the data center cooling market, including Schneider Electric and Eaton. Despite this competition, the company holds a significant market share, driven by its innovative DTC technology. The data center cooling market is expected to grow rapidly, reaching $128 billion by 2033, according to Grand View Research.
Cote’s focus on R&D and strategic acquisitions helped Vertiv stay ahead of the curve. By investing in new technologies and expanding production, the company positioned itself as a leader in the AI infrastructure space. This approach allowed Vertiv to capitalize on the growing demand for efficient data center solutions.
The success of DTC cooling has been a major factor in Vertiv’s growth. By addressing the cooling needs of AI hardware, the company has become an essential player in the data center industry. This strategic move has not only boosted Vertiv’s stock performance but also solidified its position in a rapidly evolving market.
For Vertiv’s leaders, the best way to make the products powering AI is the old-fashioned way: By nurturing a culture of listening
Cote and Albertazzi emphasized a culture of open communication and employee empowerment. They believed that the best ideas come from those on the shop floor, not just executives. This approach encouraged employees to voice concerns and suggest improvements, leading to more efficient processes and better products.
The Vertiv Production System, modeled after Honeywell’s approach and Toyota’s kaizen principles, focused on continuous improvement. Managers and engineers worked closely with mechanics and operators to design the most efficient workflows. This hands-on approach helped Vertiv refine its manufacturing processes and maintain high-quality standards.
Cote’s leadership style, which prioritized listening and collaboration, was a key factor in Vertiv’s success. By fostering a culture where employees felt comfortable sharing ideas, the company was able to innovate and adapt to changing market demands. This approach also helped Vertiv maintain a strong focus on operational efficiency.
Despite the challenges of the AI boom, Cote remained confident in Vertiv’s long-term potential. He believed that the company’s focus on manufacturing and operational excellence would continue to drive growth. This confidence was reflected in Vertiv’s strategic decisions, including its investment in R&D and production expansion.
Cote’s experience at Honeywell, where he transformed the company through operational improvements, informed his approach at Vertiv. By applying similar principles, he helped Vertiv navigate the complexities of the AI industry and position itself as a leader in data center cooling solutions.
