Data centers needs exploding: How IT is handling the flood of data

Last Updated: 5. März 2024By

The three major US indices could slowly lose momentum, especially in the previously strong technology sector. The S&P 500 Equal Weight is about 1.77% below its all-time high from early 2022. Although the robust US economy is crushing hopes of interest rate cuts, it also raises fantasies about corporate profits, which recently underwent a permanent downward revision by analysts.

The current reporting season is already showing a significant improvement compared to the earnings forecasted in early January, with a 75% positive surprise rate and a significantly higher profit increase. Analysts have been increasing their earnings expectations for the full year for about six weeks now. The biggest risk for the overall market is not in the general market breadth, but in a possible strong correction in the big tech sector. Sam Altman, the developer of ChatGPT, is currently driving groundbreaking projects, including the creation of a global alliance to build numerous chip factories, with OpenAI as a major buyer for these chips.

Altman predicts exponential growth in the field of artificial intelligence, which has not been expected by many so far. He plans to invest between 5 and 7 trillion USD, with capital expected from investors from the Middle East and Asia. Altman has already held talks with technology financier Softbank and plans to use Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract manufacturer, as the builder and operator of these chip factories. As a result, the demand for new data centers will increase dramatically in the coming years.

Modine Manufacturing (ISIN: US6078281002) The company, which specializes in cooling solutions, shows relative strength at a reasonable valuation. With a focus on cooling systems for electric vehicles and high-performance computing, it is responding to the growing demand for data center services with a wide range of products, including precision air conditioning and fan convectors. For the current year, the company expects growth in the data center sector of 60 to 70%. Additionally, Modine plans to expand its heat management business in Europe and has acquired Napps Technology.

Last year, the company recorded a net sales increase of 12% to $2.3 billion and an increase in operating profit of 26%. Analysts forecast a revenue and earnings increase of 9.2% and 48.1%, respectively, for the fiscal year ending in March 2024. The stock price has developed fantastically in recent months. The valuation is accordingly expensive, with a P/E ratio of 28.

Encouraging is the positive development of free cash flow, which increased from $56.8 million to $163 million this year. For this fiscal year, everything points to growth with an estimated revenue of $2.4 billion. In summary, Modine Manufacturing offers long-term growth potential, especially in the data center sector and e-mobility.

Technotrans (ISIN: DE000A0XYGA7) The company may be on the verge of a promising phase as a beneficiary in the field of artificial intelligence. It recently received a significant order from the USA to equip high-performance servers with liquid cooling. This marks the beginning of a promising partnership with an established major customer in the field of data center equipment. The demand for such cooling systems is growing rapidly, indicating that order volumes will increase significantly in the coming years. The company’s advanced liquid cooling technology, which is already used by industry giants such as Super Micro Computer and Vertiv, positions it optimally for further growth.

For the current year, Technotrans is forecasting an impressive increase in revenue to around 265 million EUR, with an expected increase to 285 million EUR by 2025. Profitability is also expected to improve, with a targeted EBIT margin of 9 to 12%. This positive outlook is also reflected in the company’s valuation, as the P/E ratio is expected to decrease from 16 to about 10 by 2025. This could potentially lead to a price increase of up to 30 euros, offering exciting opportunities for investors.