Zacks Investment Ideas feature highlights: NVIDIA, Modine Manufacturing, Credo Technology, Vertiv and Coherent

At CES NVIDIA unveiled major AI and robotics initiatives including Alpamayo, a 10B-parameter vision-language-action model for autonomous vehicles and a new rack-scale GPU system (Vera Rubin / next-gen racks) boasting ~100 petaflops and six new chip architectures; the author estimates each rack-scale system could cost roughly $5 million and noted operation on 45°C hot-water cooling. The cooling/architecture shift sparked sharp near-term moves in related suppliers: Modine (Airedale chillers) plunged more than 20% intraday and traded below its 200-day moving average amid concern over >$100M recent datacenter capex, while Credo shares dipped to $125 before reversing to $141 as investors reassessed copper vs optical interconnect roles and Credo’s push into optical (including the Hyperlume acquisition).

Analysis

Market structure: NVIDIA (NVDA), optical suppliers (COHR), and adaptable interconnect plays (CRDO, VRT) are the winners as rack-scale designs move to higher-temperature liquid cooling and optical scale‑out. Mechanical chiller makers and legacy copper-only suppliers (e.g., MOD’s Airedale chiller line) face demand erosion—Modine’s >$100m datacenter capex risks ~20–40% utilization hit if hyperscalers adopt 45°C liquid loops at scale over 12–36 months. Intra-rack copper still retains low-latency use cases, so CRDO and incumbents with hybrid roadmaps avoid outright obsolescence.

Risk assessment: Immediate (days) volatility will persist around CES follow‑ups and NVDA/partner order announcements; short term (weeks–6 months) earnings guides and hyperscaler procurement cadence are key catalysts. Tail risks: export controls on photonics, a faster-than-expected pivot by hyperscalers to proprietary designs, or a reliability incident with hot-water cooling could materially reset valuations. Hidden dependencies include retrofit costs, regional code/licensing for liquid cooling, and district heating economics that could either accelerate or delay adoption.

Trade implications: Prefer long exposure to CRDO and COHR (optical DSP/transceiver exposure) and selective NVDA convexity via defined-cost options; use short or hedged positions against MOD which is directly exposed to lost chiller volume. Pair trades (long CRDO or COHR, short MOD) capture relative re-rating; expect mean reversion windows of 3–12 months as design wins are disclosed. Monitor order flow and OCP announcements as execution checks.

Contrarian angles: The selloff in MOD may be overdone—large installed chiller fleets are sticky and retrofit cycles (3–7 years) give Modine time to pivot; copper-to-optical transitions historically take multiple data‑center refresh cycles. Consensus underestimates retrofits, safety/regulatory lag, and the economic incentive for hyperscalers to reuse waste heat, which would blunt near-term chiller declines. Watch NVDA customer rollouts and hyperscaler purchasing in the next 90 days as the primary reversal trigger.

Key Decisions for Investors

• Establish a 2–3% portfolio long position in CRDO if price < $140, targeting +30–50% upside over 6–12 months driven by optical transceiver adoption; hedge 20% of position with 6‑month puts if CRDO falls below $115.
• Initiate a 1.5–3% short or put position in MOD if it trades below its 200‑day MA (approx. near the $113 gap fill); target $85 in 3–9 months or cover on signs of Modine winning retrofit contracts or 2 consecutive quarters of improving datacenter order flow.
• Open a 1–2% long call‑spread on NVDA to capture platform momentum with defined risk: buy Apr/Jul 2026 call spread sized to portfolio (e.g., buy 1x 800/1000 spread or equivalent delta exposure), roll on material order announcements from hyperscalers.
• Execute a pair trade: long COHR (1–2% position) and short MOD (1% position) to capitalize on optical scale‑out vs chiller displacement; rebalance after any NVDA co‑design order disclosures or OCP/OEM signings in the next 60–120 days.