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Vertiv offers essential liquid cooling solutions for data centers, making it a mainstay in the AI industry.
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Iren is a smaller company that is growing at a much faster rate and can produce tremendous annual recurring revenue growth.
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Iren’s vast pipeline and the ramifications of the Microsoft deal make it a promising AI stock.
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10 stocks we like better than Vertiv ›
Vertiv (NYSE: VRT) is one of the best artificial intelligence (AI) stocks thanks to investor enthusiasm regarding its liquid cooling solutions, which are critical for data centers. The stock outperformed the S&P 500 for quite a long time. Shares are up 39% over the past year and are up more than 550% over the past five years.
Vertiv is still delivering solid numbers and is still a solid growth stock, but the stock has already had a good run. Some smaller AI-focused stocks have the potential to generate higher returns. AI-focused data center operator Iren (Claws: Iren)for example, it has seen its stock price more than quadruple in the past year but still has a smaller market cap than Vertiv. Iren also has tremendous revenue growth potential that could turn it into an AI giant.
Iren’s potential for further outsized growth is largely tied to a recent five-year deal Microsoft (NASDAQ: MSFT). The deal lets Microsoft use 200 megawatts of Iren’s power for a contract value of $9.7 billion. Iren also negotiated a 20% upfront fee, which will help fund the company’s expansion while making it less dependent on debt and dilution. The deal averages about $2 billion a year, and with about 3 gigawatts of power in the pipeline, Iren will soon have enough capacity to support 14 additional deals like the Microsoft contract.
Those numbers, combined with Iren’s desire to expand its pipeline, suggest that $20 billion in annual recurring revenue is possible within five to 10 years. Iren is targeting $3.4 billion in annual recurring revenue by the end of 2026, compared to $3.1 million in cloud AI revenue in fiscal 2024 and $16.4 million in fiscal 2025.
Iren’s management told investors when they discussed fiscal 2025 results that it expected to reach $200 million to $250 million in annual recurring revenue by December 2025. The Microsoft deal put the company well ahead of that guidance and suggests it could pass $3.4 billion in annual recurring revenue by the end of 2026.
Vertiv is not a bad AI stock. All you have to do is look at the long-term outlook to see that it has outperformed the S&P 500. However, it is not growing as fast as Iren. The growth stock delivered revenue growth of 29% year over year in Q3 but only offered guidance for revenue growth of 18% to 22% year over year in Q4. This suggests that its growth may be slowing down. Vertiv can still deliver impressive returns as it expands profit margins, and liquid cooling solutions will remain in high demand as the AI infrastructure continues to expand.