Meet the Under-the-Radar Stock Quietly Powering the AI Data Center Boom
Key Points
The rapid growth of artificial intelligence data centers is driving demand for less obvious services.
The construction of complicated aspects of these physical facilities is one of these in-demand services.
One of these companies has already proven it’s benefitting from this tailwind, with plenty more growth ahead.
At first glance, it looks like just another institutional engineering and construction contractor specializing in plumbing, HVAC, and electrical work. And technically speaking, that's exactly what it is.
Nevertheless, the rapid explosion of artificial intelligence data centers is proving a boon for Comfort Systems USA (NYSE: FIX). Last quarter's top line of $3.27 million was up 50% year over year, reflecting the fact that nearly 60% of this company's business comes from the technology sector, with the lion's share of that business coming from the construction of new AI data centers.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Moreover, the company's backlog grew from $12.45 billion at the end of March to $14.06 billion as of the end of June. Again, data centers are the chief driver of this future growth.
Image source: Getty Images.
If you're interested in becoming a shareholder, just think it through carefully before diving in. While it's a relatively small and relatively unknown name, at least a few investors have connected the dots. The stock's up over 140% for the past year and more than 2,000% higher for the past five years, in step with the explosion of artificial intelligence data centers.
That's made the stock relatively expensive -- although not outrageously so. Shares are trading at roughly 30 times next year's expected per-share profit of $60.04, up roughly 23% from analysts' bottom-line projection for this year, en route to expected earnings of $75.46 per share in 2028.
And speaking of analysts, most of the few covering Comfort Systems USA rate its stock a strong buy with a consensus price target of $2,217.63, more than 27% above the ticker's current price.
It's certainly not the only overlooked way to plug into the artificial intelligence craze that's still going strong. But this stock's certainly worth a closer look, or a spot on your watch list.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA. The Motley Fool has a disclosure policy.