The data center cooling trade—one of the most profitable themes for HVAC investors over the past two years—came under severe pressure Tuesday following comments from Nvidia CEO Jensen Huang at CES 2026. Trane Technologies suffered its worst intraday drop since 2020, falling as much as 11%, while Modine Manufacturing cratered 21% as investors reassessed the long-term demand outlook for data center cooling infrastructure.

What Jensen Huang Said

During his keynote presentation in Las Vegas, Huang discussed Nvidia's next-generation Vera Rubin AI platform and its implications for data center architecture. While the comments were forward-looking rather than immediately actionable, investors interpreted them as signaling that future AI chips would be significantly more power-efficient, potentially reducing the massive cooling requirements that current systems demand.

The market's reaction was swift and severe. HVAC companies that had positioned themselves as key beneficiaries of the AI infrastructure buildout saw billions of dollars in market value evaporate within hours.

"The selloff reflects how sensitive these stocks have become to any narrative change around data center spending. Investors had priced in years of elevated cooling demand, and even modest doubt about that trajectory triggered a violent repricing."

— Wall Street analyst commentary

The Damage Across the Sector

No major HVAC stock escaped the carnage:

  • Trane Technologies (TT): Dropped as much as 11% in its worst intraday decline since March 2020
  • Modine Manufacturing (MOD): Plunged 21% as investors fled the pure-play data center thermal management company
  • Carrier Global (CARR): Fell 5% despite more diversified exposure
  • Johnson Controls (JCI): Declined as concerns spread across the sector
  • Vertiv Holdings (VRT): Dropped sharply, though its power equipment business provides some hedge against cooling-specific concerns

The severity of the declines reflects how much these stocks had appreciated on the data center thesis. Johnson Controls surged 52% in 2025, while Vertiv advanced 43%. Trane had become a market darling for investors seeking exposure to AI infrastructure without buying semiconductor stocks directly.

Assessing the Actual Exposure

The panic selling may have been overdone when examining the actual data center exposure for these companies. Johnson Controls has disclosed that data centers represent approximately 10% of total revenue. Carrier estimates its data center exposure at about 10% of commercial HVAC sales, or a low-single-digit percentage of total sales.

Trane hasn't disclosed specific figures, but analysts believe its exposure falls within the range of its peers—meaningful but far from dominant. These are diversified industrial companies serving building automation, residential HVAC, refrigeration, and other markets that have nothing to do with AI infrastructure.

Yet the market didn't differentiate on Tuesday. Stocks sold off in proportion to how aggressively they had been bid up on the data center narrative, regardless of actual exposure levels.

The Bull Case Survives

Despite Tuesday's rout, the fundamental case for data center cooling demand remains intact. AI workloads generate enormous heat, and that heat must be dissipated regardless of incremental efficiency improvements in future chip generations. The global AI infrastructure buildout is measured in hundreds of billions of dollars over the next decade, and cooling represents a meaningful share of total facility costs.

Morningstar maintained its fair value estimates for the major HVAC players following Tuesday's decline: $53 per share for Carrier, $80 for Johnson Controls, and $223 for Trane. The research firm characterized Carrier and Trane as overvalued even after the selloff, while viewing Johnson Controls as fairly valued.

The Morningstar assessment suggests the correction, while painful for recent buyers, may have brought prices closer to intrinsic value rather than indicating fundamental problems with the business models.

What Nvidia's Vision Actually Means

Huang's comments at CES focused on how the Vera Rubin platform and future architectures will deliver more compute per watt than current systems. This is unambiguously good for data center operators facing electricity constraints and sustainability pressure. More efficient chips mean lower operating costs and smaller carbon footprints.

But more efficient chips don't necessarily mean less total cooling demand. The history of computing shows that efficiency gains are typically reinvested into more compute rather than reduced power consumption. Data center operators don't want to run less AI—they want to run more AI within the same power envelope.

The analogy to semiconductors is instructive. Each generation of chips has been more power-efficient than the last, yet total data center power consumption continues climbing because workloads expand to absorb available capacity. The same dynamic likely applies to cooling.

Opportunity in the Panic?

For long-term investors, Tuesday's selloff presents a potential opportunity. The HVAC companies serving data centers are fundamentally strong businesses with diverse revenue streams, growing backlogs, and secular tailwinds beyond AI. Building electrification, replacement demand for aging systems, and sustainability mandates provide multiple growth drivers independent of data center trends.

Investors who bought these stocks specifically as AI plays may want to reassess. But those with longer time horizons and tolerance for volatility might find current prices attractive entry points—assuming the market hasn't fundamentally misunderstood something about the cooling demand trajectory.

The key question for the coming days: Was Tuesday's decline a one-time repricing based on a narrative shift, or the beginning of a more sustained derating of data center-adjacent stocks? The answer likely depends on follow-up commentary from the companies themselves and additional clarity from major data center operators about their infrastructure spending plans.