(Bloomberg) — Makers of cooling systems saw their stocks sell off Tuesday after comments by Nvidia Corp.’s chief executive raised fears about demand for their products from data centers.
Johnson Controls International Plc, which makes water-cooled chillers and similar systems, slid 6.2% in its worst day since July. Modine Manufacturing Co. closed down 7.5% after paring an earlier drop of as much as 21%. Trane Technologies Plc fell 2.5%.
Most Read from Bloomberg
It’s possible to cool racks with Nvidia’s next-generation Rubin chips using water at a temperature that does not require a water chiller, the company’s CEO, Jensen Huang, said at the CES trade show in Las Vegas. Chillers are a “predominant” piece of the equipment that companies like Johnson Controls and Trane provide to data centers, according to Bloomberg Intelligence.
“The comments create some questions/concerns about the longer-term positioning of chillers within data centers over time, particularly as liquid cooling becomes more prominent,” Baird analyst Timothy Wojs wrote in a note to clients. Liquid cooling allows systems to operate at higher temperatures, he added.
While Wojs does not see a big risk to the cooling companies’ near-term estimates, he expects the “news to create some incremental concerns around orders, especially later in 2026.”
Hungry for exposure to an artificial intelligence boom, investors last year piled into shares of companies making the equipment that keep racks of AI chips from overheating. Johnson Controls stock surged 52% in 2025, and Vertiv Holdings Co., which makes both cooling systems and power equipment, advanced 43%. Weakness in the residential HVAC market weighed on shares of other players, such as Trane.
Huang’s comments at CES also sparked the latest leg of a rally in data-storage stocks, another group caught up in enthusiasm about AI. Sandisk Corp. rose 28%, the top percentage gainer in the S&P 500 Index on Tuesday, after the Nvidia CEO highlighted the need for memory and storage. The stock has now soared more than 1,000% from an April low.
‘Overdone’ Selloff
Investors’ flight from cooling names is “overdone,” Citi analyst Andrew Kaplowitz told clients. Cooling-system makers have relationships with chipmakers and data center operators, he said, and the risk that they’ll fall behind as data-center technology evolves is manageable.
“While we acknowledge that the Rubin comments underscore the rapid evolution of thermal management in data centers, we don’t think this is catching our companies by surprise,” Kaplowitz said.