It is surely only a matter of time before the market starts to focus on the positive of a more doveish Fed. A Fed rate cut by September must remain the base case if inflation remains benign in the sense of the impact of the tariffs continuing not to show up in the data. All this is why perhaps the biggest risk to the US stock market remains a significant back-up in long-term Treasury bond yields, as indeed has been the case ever since Trump retreated from his tariff agenda.

With June data just starting to trickle in, it is still too early to track the impact of tariffs on firms’ pricing behavior. There is no doubt that the Trump administration’s tariffs will impose a drag, but who bears the brunt of this cost remains to be seen. Our baseline forecast – based on prior business behavior during the past trade war – suggests firms will pass on the bulk of the costs to consumers, squeezing US household purchasing power and in turn weighing on consumer spending. Firms could instead cut into their own margins to avoid price hikes, though this too would drag on US growth by promoting some pullback in firms’ spending. Finally, foreign exporters could instead lower their prices to offset the higher tariff costs, thus protecting their US market share but shifting the incidence of the tariff cost from the US to its trading partners.

We see the 30% tariffs announcement as an opening move and eventual tariffs are likely to set lower in the 10-15% range. The announcement of higher tariffs is a negotiation tactic which should encourage EU and other countries to make a deal quickly. However, the recent tariff announcements over last week also highlight the uncertainty around tariffs and that uncertainty has probably moved up a notch.

PAIGE HANSON (INDUSTRIALS) - VRT (-6%): Rebuttal from Bulls & Additional Feedback on Selloff (more than half recovered already) – factors are certainly not helping today as we’re continuing the MTD trend of momentum/crowded longs for sale & sharp squeeze on other side in underweight/shorted cyclicals (will leave that topic of another blast), but the selloff in the data center industrial component names, specifically liquid cooling players like VRT, NVT etc is greater and tied to the CNBC coverage last night of AWS’s decision (not new, first announced in Dec ’24) to focus on developing as much of the infrastructure in-house, with the quoted parts in CNBC (from a YouTube posted by AWS on their new product) painting liquid cooling in a negative light, but there are multiple reasons folks are pushing back vehemently on this move as I’ve outlined below. Majority of investors felt earlier selloff was the wrong reaction, an overreaction and the px action with dip-buying is already healthy to see with move lower cut in half. That said, we’ve had close to zero debate on VRT for almost 12 weeks now (!) as the stock has rallied significantly off lows in April so that’s contributing to the panic/ pot’l overreaction to this first non positive AI infra headline in multiple months – the key in whether this is the start of VRT selling or a buy the dip opp lies in my opinion in the below rebuttal arguments from investors (and why I’m with the bulls on this one), but would love to hear your thoughts and if anything not included below in defense of VRT. Also, if you believe there is concrete evidence this displaces VRT in the supply chain or any other fundamental read on VRT negatively from this, I’d love to hear it (I’ve heard almost none of this so far FWIW, ut as we know from summer 2024 and winter/spring 2025, tech investors love to go after VRT on short side so I will have ears open for specifics).

Implications of AWS Custom Liquid Cooling System Published July 10 2025 14:08:58 EDT

On July-9, Amazon Web Services published a blog post spotlighting their new custom AI liquid cooled servers for Nvidia Blackwell GPUs. This is not “new news”. There was also a June-11 post on how they were close to launching this custom system. It is now common for hyperscale players to develop their own next-gen liquid cooling systems. Importantly, electrical OEs like NVT provide critical development/test support to hyperscalers for these custom systems. We do not see the OEs like NVT and VRT being disintermediated. We view any DeepSeek-like panic selling on this development to be overdone/unwarranted. Bottom line is that the AWS announcement of new custom liquid cooled servers is not new news in the liquid cooling industry nor should it imply that AWS is becoming a new competitor to existing liquid cooling OEs including Vertiv, nVent, Motivair (Schneider), or Modine. Our understanding is that hyperscalers typically partner with leading liquid cooling vendors in R&D/testing, which has been one of the drivers of nVent’s +4x capacity expansion since Jan-2023 for manufacturing and precise testing of these liquid cooling systems. Yes, this means that AWS will have a custom liquid cooling “white box” for its AI servers, an unbranded server that is co-developed via R&D partnership. What we do not know at this time is how much these customer R&D efforts drive Vertiv and nVent’s revenues currently, and who AWS has partnered with. Part the reason you are seeing these custom system announcements is because there is little standardization in the liquid cooling industry to date. The benefit of efficiencies/competitive advantages in having customized liquid cooling solutions means we are likely to see more of these announcements from hyperscalers. See AWS July-9 blog post here and June-11 post here

SUMMARY: Vertiv shares dropped as much as 14% today (XLI closed +0.5%) after reports that Amazon had launched “a cooling competitor for AI servers”, according to major media outlets. While liquid cooling for data centers is currently a relatively small part of Vertiv’s overall business, it represents a disproportionate share of prospective growth. So, it’s understandable to see underperformance on the back of these headlines, in our view. But we believe these fears are misguided -- just as they were during two pullbacks in the past year, when Vertiv shares dropped significantly only to rebound strongly. We think this time is no different. Based on our checks, we do not believe that Amazon is competing with Vertiv’s liquid cooling offering. This would entail manufacturing of many components like coolant distribution units (CDUs), manifolds, pumps, radiators, heat exchangers, and cooling fluid, in addition to fans, seals, bearing-less solutions and motors