Barlow’s Research Roundup: These companies powering and cooling new data centres see stock prices climb

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Industrials profit from data centres

Waves of cash are still flowing towards data centre construction amid a shortage of computing capacity and the industrial companies powering and cooling the data centres continue to benefit, according to Citi analyst Andrew Kaplowitz,

“After attending the Data Center World conference, we view growing investments into data center infrastructure and evolving data center power + thermal management needs as durable tailwinds … We highlight Buy-rated ETN, VRT, NVT, and PH. A consistent theme across our meetings was the accelerating adoption of liquid cooling, which participants broadly view as still in the relatively early stages despite meaningful ramp in activity over the past 12-18 months, suggesting significant runway ahead for companies offering liquid cooling systems and components. Modularization and speed of deployment were also highlighted as key competitive differentiators as pre-fabricated solutions meaningfully compress onsite deployment timelines. Power architecture was also an increasingly active area of innovation, with discussions around 800VDC architecture and solid-state transformers reflecting the industry’s push to efficiently deliver and manage power at rising rack densities”

Oil and inflation

BMO chief economist Doug Porter addressed the renewed strength in oil prices and the subsequent inflation pressure,

“Oil prices climbed for a second session as the ceasefire deadline ticks down, and as it’s not even clear the two sides will talk. WTI rose to as high as $94, a long way from the low-80 zone reached on Friday, after Iran suggested it was re-opening the Strait. While prices backed down to around $92, close to where they were last Thursday, and almost right in line with the average WTI price since the conflict first erupted (just above $94). Note that current prices represent almost exactly a 50-per-cent increase from the average price prior to the war. As we have oft noted, inflation tends to be bumped up by 0.2 ppts in North America for every 10-per-cent rise in oil. So, if these prices are sustained, it would add 1 ppt to overall inflation (a good part of that got captured in the March readings already). We also estimate it could clip GDP growth by up to 0.5 ppt—again, if these prices are sustained”

Global stock forecasts dim

BofA Securities quantitative strategist Nigel Tupper sees a slowdown in global earnings using his ratio of number of stocks with rising earnings forecasts divided by those with falling expectations,

“The Global Earnings Revision Ratio fell from 0.98 to 0.76 in April as higher oil prices and potential supply chain issues negatively impacted earnings expectations in all regions. The Ratio fell in the US (1.13 to 0.77), Europe (0.75 to 0.66), Japan (1.63 to 1.15), Asia Pac ex-Japan (0.90 to 0.69), and Emerging Markets (0.85 to 0.70). The Ratio surged for the global Energy sector (1.98 to 2.88) but moderated for all other sectors. Despite lower FY1 earnings estimates, consensus earnings growth forecasts remain strong for 2026 and 2027. The key for equity markets could be whether downgrades persist. Despite a lower Ratio in most global sectors, the Ratio remains above 1.00 for Tech Hardware (1.38), Insurance (1.03), and Materials (1.01). The Ratio fell the most for Diversified Financials, Semis, Media, and Banks, and moderated slightly for defensives including Health Care, Telecom, and Utilities. Multi-year extremes in Asia Among major countries in Asia, the Ratio is highest for Taiwan (1.68) and Korea (0.99). The Ratio fell in China (0.65), Australia (0.59), and reached a multi-year low in India (0.59)”

Bluesky post of the day

Diversion

“Jeff Bezos’ Botched Space Launch Was So Bad It Could Threaten NASA’s Entire Moon Program” - Futurism