Bernstein: Feedback after initiation on data centers and HVAC; TT is the most resilient, NVT and JCI offer more upside, sentiment on VRT turns more cautious, CARR dragged by residential

Overview

This is a post-initiation feedback report on the U.S. multi-industry and electrical equipment sector, focused on data center- and HVAC-related companies. After initiating coverage in early June 2026, Bernstein compiled the main investor concerns, market sentiment, valuation debates, earnings catalysts, and risks for VRT, NVT, TT, JCI, and CARR. The report generally argues that data center capex and GW additions remain the key prerequisites for investing in these names, but company exposure differs: VRT and NVT benefit more directly and are also more sensitive, while TT, JCI, and CARR combine HVAC exposure with broader building end-market exposure.

Core views

The core view is: VRT still has long-term competitiveness, but in the short term it needs strong 2Q26 results and more constructive commentary on orders/demand to ease market anxiety; NVT is at an earlier growth stage, and its liquid cooling and Systems Protection businesses still have significant revenue expansion potential; TT has the strongest management credibility and execution stability, making it a lower-volatility choice for data center and HVAC exposure, though it looks expensive; JCI’s transformation creates opportunities for re-rating and margin improvement, with the key risk being whether execution can scale; CARR has attractive valuation and strong data center performance, but insufficient recovery in the U.S. residential and European heat pump markets leaves it rated below the other names.

Analysis framework

The report mainly analyzes post-initiation investor feedback, discussions with company management, 2Q26 earnings expectations, data center capex trends, product technology roadmaps, and valuation methodologies. The valuation section uses EV/EBITDA, EV/EBIT, and SOTP methods, and compares each company based on business mix, growth stage, margin path, and risk factors.

Methodology notes

• investor feedbackpost-initiation feedback framework

  tracking sentiment, points of controversy, and catalysts

  The report groups investor questions into valuation, growth sustainability, margins, product competitiveness, and execution risk, and uses this feedback to assess short-term market expectations and potential stock catalysts.

• Valuation methodsEV/EBITDA and EV/EBIT multiple valuation

  derive target prices based on NTM+1 earnings and target multiples

  VRT, TT, and JCI are primarily valued using NTM+1 EBITDA and EV/EBITDA multiples, while CARR uses NTM+1 EBIT and EV/EBIT multiples, to reflect each company’s profitability and the growth premium assigned by the market.

• Valuation methodsSOTP segment valuation

  value business units separately and then combine them

  NVT uses the SOTP method, applying different EBITDA and valuation multiples to Electrical Connections and Systems Protection, in order to reflect the differences between high-growth liquid cooling/data-center-related businesses and traditional connection businesses.

• risk analysisdata center capex sensitivity

  identification of shared downside risks

  The report argues that the persistence of data center capex and GW additions is a common entry condition across the covered names; if hyperscaler capex, project pipelines, or the AI demand narrative weaken, the downside could be greater than company-specific factors.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• VRT / VERTIV HOLDINGS CO

  the purest beneficiary of data center power and cooling exposure

  Strengths

  Deep relationship with NVIDIA, fast innovation cycle, backlog and capacity expansion support long-term growth, and rising rack costs favor mature suppliers.

  Weaknesses

  High valuation, investor sentiment has turned cautious ahead of earnings, and 800V DC may reduce content value per MW while introducing stronger competition from native power players.

  Comparison

  Compared with NVT and HVAC names, VRT is a purer play on data center power and cooling, and is therefore more sensitive to AI trading sentiment and capex changes.

  Risks

  Insufficient magnitude of 2Q26 upside surprise, weaker-than-expected response to 800V DC, CDU commoditization, and slowing AI capex or GW additions.

• NVT / NVENT ELECTRIC PLC

  an early-stage growth name in liquid cooling and data center systems protection

  Strengths

  Enhanced liquid cooling portfolio, cooperation with OCP and NVIDIA improves roadmap visibility, Systems Protection is still in the capacity ramp stage, and growth potential is at an earlier stage.

  Weaknesses

  Some investors believe products may become commoditized, Systems Protection margins are pressured by insufficient fixed-cost absorption, and Electrical Connections is affected by copper prices and inflation pressure.

  Comparison

  Compared with VRT, NVT faces less valuation controversy and its data center business may be underestimated; compared with TT/JCI/CARR, NVT has greater elasticity to liquid cooling and data center growth.

  Risks

  CDU/OCP commoditization, unsuccessful capacity ramp-up, longer hiring cycles for key roles, and margin pressure from rising copper prices.

• TT / Trane Technologies PLC

  high-quality and resilient exposure to data centers and commercial HVAC

  Strengths

  High management credibility, the least investor controversy, resilient expectation for mid-teens EPS growth, and support in CDU from a 2.5MW modular product and the LiquidStack acquisition.

  Weaknesses

  Valuation is at historical highs, with NTM P/E above 30x and NTM EV/EBITDA above 20x, and disclosure on data center revenue is not sufficiently detailed.

  Comparison

  Compared with JCI, TT has lower execution risk but less room for re-rating; compared with CARR, TT is less dragged down by the residential cycle; compared with VRT/NVT, TT’s data center exposure is more diversified.

  Risks

  De-rating from high valuation, price-fixing litigation, competitors catching up in liquid cooling product innovation, weaker-than-expected residential or transport businesses, and chiller pressure offsetting liquid cooling upside.

• JCI / JOHNSON CONTROLS INTERNATIONAL PLC

  a transformation-improvement play in HVAC and building technology

  Strengths

  Investor sentiment improved after Gemba Day, while commercial efficiency and operational throughput gains offer room to unlock margins and growth, and management background and organizational experience are relatively well matched.

  Weaknesses

  A relatively heavy historical execution burden, transformation still needs to prove it can scale, conversion from orders to revenue still needs to show up over the next few quarters, and the strategic positioning of the F&S business is uncertain.

  Comparison

  Compared with TT, JCI has greater upside and re-rating potential but also higher execution risk; the report believes both offer positive risk-reward, with the choice depending on investor risk preference.

  Risks

  Lean transformation cannot be replicated across the organization, weaker data center chiller demand, operating leverage below management’s 50% guidance, and uncertainty around the disposition of the security business.

• CARR / CARRIER GLOBAL CORP

  a mixed exposure to data center HVAC growth and residential cycle recovery

  Strengths

  Valuation trades at a discount relative to JCI and TT, the data center business is growing strongly, annualized revenue guidance has been raised to $2.5B, and chiller capacity expansion and commercial aggressiveness are strong.

  Weaknesses

  The U.S. residential market still lacks a structural recovery, about 40% of residential demand is affected by interest rates, and improvement in Europe’s Viessmann and heat pump sales is insufficient to support expectations implied by the acquisition price.

  Comparison

  Compared with TT and JCI, CARR is cheaper but more clearly dragged by residential and European heat pumps; compared with VRT/NVT, CARR has lower data center exposure and is more dependent on the HVAC product cycle.

  Risks

  U.S. residential demand in 2026 still merely declines less rather than grows, mortgage rates do not fall, heat pump penetration in Germany and the UK improves slowly, and data center growth sustainability is insufficient.

Key data

• VRT rating and target priceOutperform, target price $416The target price is based on 32x NTM+1 EBITDA and $5.1B EBITDA; the report says it will revisit the target price based on subsequent analysis.
• NVT rating and target priceOutperform, target price $218Uses SOTP valuation: the EC business uses $417M NTM+1 EBITDA and 17x EV/EBITDA, while the SP business uses $1,063M NTM+1 EBITDA and 28x EV/EBITDA.
• TT rating and target priceOutperform, target price $550Based on 22x NTM+1 EBITDA and $5.6B EBITDA; investors have relatively high confidence in management and mid-teens EPS growth.
• JCI rating and target priceOutperform, target price $176Based on 20x EV/EBITDA and $5.9B NTM+1 EBITDA; management guidance implies incremental margins of about 50% this year.
• CARR rating and target priceMarket-Perform, target price $75Based on 18x EV/EBIT and $3.9B NTM+1 EBIT; the data center business is strong but the U.S. residential and European heat pump businesses are still under pressure.
• VRT 2Q26 guidanceorganic growth 20%-24%, EPS growth 44%-51%The market is looking for a clear beat and raised guidance; merely beat and raise may not be enough.
• NVT 2Q26 organic growth guidance23%-25%The report believes the market may be expecting another beat and raised guidance, and a simple in-line result may be poorly received.
• CARR data center business annualized revenuerun rate raised from $1.5B to $2.5BThe company already raised its annualized data center business revenue outlook after 1Q, and it could be higher by year-end if hyperscaler capex continues.
• TT estimated data center revenueabout $3B-$4B in 2026, about 15% of total revenueThe report expects TT, JCI, and CARR data center revenue could account for about 30% of business by the end of this decade.
• JCI transformation implementation timelinebegins to be reflected in P&L in 12-18 monthsOn the commercial side, it increases sales field time; on the operations side, it raises production-line throughput with lower capex.

Impact & implications

For investment purposes, the report supports continued preference for the data center and HVAC chain, but suggests differentiating names by risk appetite: TT suits investors seeking stable execution and lower controversy; NVT and JCI are better for investors willing to take growth or transformation execution risk in exchange for greater upside; VRT requires tolerance for high volatility stemming from AI trading and technology roadmap risks; CARR depends more on improvement in the residential cycle and European heat pump demand. The biggest shared variable across the group is not any single company, but whether hyperscaler capex, GW additions, and the pace of AI infrastructure buildout can continue.

Risks

• A slowdown in data center capex and GW additions is the biggest common downside risk across all names, especially for VRT and NVT.
• 800V DC may reduce VRT’s content value per MW and increase competitive pressure from native power companies such as Eaton, Schneider, or GE Vernova.
• CDU and liquid cooling products may gradually become commoditized, weakening the pricing power and margins of companies such as VRT, NVT, and TT.
• VRT, NVT, and JCI all face margin volatility from capacity expansion, fixed-cost absorption, or transformation execution.
• TT’s valuation is already at historical highs; if data center growth, hyperscaler capex, or margin expansion falls short of expectations, there is de-rating risk.
• If JCI’s transformation cannot expand from pilot programs to the whole organization, or if operating leverage falls below management’s 50% guidance, the re-rating thesis will be damaged.
• CARR is affected by U.S. residential demand, mortgage rates, European heat pump penetration, and returns from the Viessmann integration, and near-term evidence of recovery is insufficient.
• If hyperscalers reduce AI infrastructure spending due to market pressure, or if order delays/cancellations increase, the entire data center equipment chain could come under pressure.

What to watch

• Whether VRT’s 2Q26 results not only beat and raise, but do so by enough to support the current valuation.
• Whether VRT management provides qualitative information on orders, demand, and 800V DC exposure to ease investor anxiety.
• NVT’s next-generation CX/CZ CDU product launches, CDU production-line ramp, and stabilization of Systems Protection margins.
• Whether copper prices, pricing pass-through, and productivity improvement are enough to repair NVT Electrical Connections margins.
• TT’s disclosure of data center revenue scale, LiquidStack integration, competitiveness of its 2.5MW CDU, and whether high valuation can continue to be supported by growth delivery.
• Whether JCI’s commercial and operational transformation enters the P&L within 12-18 months, and whether incremental margins approach or exceed 50%.
• Whether JCI’s Fire & Security strategic review leads to partial asset sales or a spin-off.
• Whether CARR’s data center run rate continues above $2.5B, and whether growth is driven by structural share gains or short-term capacity and commercial strategy.
• Whether the U.S. residential market shows a genuine structural recovery, especially in mortgage rates, housing starts, and transaction volume signals.
• Whether heat pump subsidies, energy prices, and penetration in Germany and the UK improve, determining whether CARR’s European and Viessmann-related businesses can return to growth.