NVT vs. SMCI: Which Data Center Infrastructure Stock is a Better Buy?

The Case for nVent Electric Stock

nVent Electric is seeing strong demand from data centers as spending on artificial intelligence (AI) infrastructure continues to rise. NVT expects the infrastructure vertical to post strong double-digit growth in 2026, supported by higher AI-related data center investments. Further, the company expects data center sales to exceed $2 billion in 2026, more than double from 2025 levels.

Growth is coming from liquid cooling, cable management and engineered buildings. NVT is also serving a broad customer base, including hyperscalers, neo-clouds and multi-tenant data centers. The company ended the second quarter with a $2.5 billion backlog, and management sees data center orders remaining strong in the third quarter of 2026.

The growing use of AI is adding another source of demand. Due to rising computing needs, AI data centers require more power, which is leading to rising investment in power infrastructure. NVT serves utilities directly as well as through distribution partners. The company sees opportunities in engineered buildings and other infrastructure used around data centers, as well. This gives the company an opportunity to benefit from higher power demand beyond its direct data center business.

NVT is also adding capacity to meet rising demand. The company expects to spend about $130 million on capital expenditures in 2026, up 40% year over year. Most of the higher investment is going toward capacity for data centers, power utilities and supply-chain resilience. The company opened its Blaine facility in Minnesota earlier in 2026, which effectively doubled its liquid-cooling capacity. Further, management said another expansion is needed and announced the Blaine 2 facility, which is expected to open in the first half of 2027.

The above-mentioned factors show that NVT remains well-positioned to benefit from strong AI-related demand, healthy orders and new capacity, which could help the company maintain its growth momentum.

The Case for SMCI Stock

Super Micro Computer is seeing strong demand for liquid-cooled systems as AI data centers use more powerful and higher-density servers. Management expects liquid cooling to grow quickly and eventually become a major part of data center infrastructure. SMCI said newer GPU and CPU platforms are now ready for liquid cooling, which could increase demand for its systems.

SMCI already has experience in liquid cooling. Management said the company was an early leader in this technology and shipped more than 80% liquid-cooled systems to the market in 2024. The company is also increasing production capacity. Its total manufacturing capacity is expected to exceed 6,000 racks per month, including more than 3,000 direct liquid-cooled racks. Most of these lines support high-density 250-kilowatt rack platforms.

Liquid cooling is also part of SMCI’s Data Center Building Block Solutions (DCBBS). The company combines servers, storage, liquid cooling, networking, software and other data center equipment in one solution. SMCI says this can help customers build data centers faster and lower their total costs. This is important because power, cooling and networking issues delayed some customer deployments in the fourth quarter. If liquid cooling becomes more common in AI data centers, SMCI’s growing capacity and DCBBS offering could help it benefit from this trend.

However, SMCI's non-GAAP gross margin declined to 10.9% in fiscal 2026 from 11.2% in fiscal 2025. A major reason behind the decline in gross margin is the company's high exposure to GPU-based AI systems. Management noted that high-volume GPU products generally have lower margins than CPU, storage, IoT and enterprise products. As SMCI expanded its AI infrastructure business, the product mix put pressure on overall gross margins.

Further, SMCI's gross margin outlook for the first quarter of fiscal 2027 also points to continued pressure. After reporting fourth quarter non-GAAP gross margin of 17.6%, SMCI expects gross margins to be in the range of 10.4%-10.8% in the first quarter fiscal 2027. The lower first quarter fiscal 2027 guidance, reflects steep sequential decline and reinforces the concern that margins could remain volatile as the company continues to scale its AI infrastructure business.

How Do Earnings Estimates Compare for NVT & SMCI?

NVT has a steady earnings growth outlook compared with SMCI.

The Zacks Consensus Estimate for NVT’s 2026 EPS is pegged at $4.56 revised upward by 12.5%, over the past 30 days and indicates a year over year growth of 53.1%.

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The Zacks Consensus Estimate for SMCI’s fiscal 2027 is pinned at $3.48, revised upward by 2.95% over the past seven days and indicates a year over year decline of 4.1%.

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NVT vs. SMCI: Price Performance and Valuation

Year to date, shares of nVent Electric and SMCI have surged 73.5% and 30%, respectively.

NVT vs. SMCI: YTD Price Return Performance

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Currently, nVent Electric is trading at a forward sales multiple of 4.57X, higher than SMCI’s forward sales multiple of 0.37X. NVT’s rally reflects investor excitement about AI-related data center demand, putting it above SMCI in terms of valuation, reflecting the high growth expectations of the company in the long term.

NVT vs. SMCI: Forward 12-Month P/S Ratio

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Conclusion: NVT Has an Edge Over SMCI

Both nVent Electric and SMCI are benefiting from higher spending on AI data centers and infrastructure. However, SMCI’s near-term prospects suffer from higher exposure to lower-margin GPU systems due to which the company’s margins could remain volatile in the near-term. In contrast, nVent Electric is experiencing strong demand for data center infrastructure, which is helping drive strong orders and a growing backlog.

Currently, nVent Electric sports a Zacks Rank #1 (Strong Buy), giving a clear edge over SMCI, which carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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