Jim Cramer Just Identified an AI Infrastructure Supplier Yet to Fully Price in April’s Compute Demand Surge

April was the month investors began to grasp just how important CPUs had become. Up until now, large language model (LLM) training was all about who could amass the most amount of GPUs to train their models. Leading up to Intel’s (INTC) recent earnings report, investors had already stopped asking how many GPUs AI needed. Instead, the focus shifted to how many CPUs were needed for each GPU to deliver optimal inference performance. Intel earnings recognized this shift, with CEO Lip-Bu Tan pointing out the obvious on the earnings call:

“CPU is very important when you move from training to inference. The inference side, I think in terms of orchestration, control plane and also managing all the different agent with data, CPU is much more efficient. I think the ratio of CPU to GPU used to be 1 and 8, and now it’s 1:4 and I think towards parity or even better.”

As soon as the confirmation arrived, chip stocks took off. Advanced Micro Devices (AMD) earnings underscored the thesis. The resulting demand spurred another leg in memory stocks, some of which have more than doubled since the beginning of April. ETFs like the iShares Semiconductor ETF (SOXX) and the Roundhill Memory ETF (DRAM) saw considerable inflows. CNBC columnist and presenter Jim Cramer pointed this out recently and hinted at a stock that was being ignored, but could still deliver similar results to its peers.

The stock in question is Modine Manufacturing (MOD), a company that provides the cooling infrastructure for data centers. The thesis is simple: If inference requires more CPUs than expected, it means more total server power draw, resulting in more heat that needs to be removed from the data centers. MOD’s liquid cooling technology is a potential beneficiary of this. 

About Modine Manufacturing

Modine Manufacturing specializes in thermal management for heating, ventilation, and cooling solutions, though it has lately been an integral part of cooling solutions for data centers, and therefore now known as an AI infrastructure play. The company was founded in 1916 and is headquartered in Wisconsin.

In the last month, the stock has only gained 11%. This is an underwhelming performance considering the iShares Semiconductor ETF was up over 35% during the same time. This is the opportunity Cramer is pointing out. With high inflows into some semiconductor ETFs, analysts indicate the rally still has a long way to go. This makes MOD an attractive opportunity where money could start flowing as investors notice the opportunity. The stock has already done well since Cramer pointed it out, and despite that, an 11% performance over one month is quite underwhelming.

Modine Manufacturing Earnings Could Provide the Trigger

The company is expected to announce its earnings on May 19 and that’s when we get more insights into what’s ahead. MOD has beaten Wall Street expectations for the last four quarters, and an earnings beat in the upcoming report won’t be any surprise. It is the guidance that will provide the trigger and the stock could rally again if the Street finds it to their liking.

The firm reported its previous earnings report on Feb. 4, comfortably beating earnings expectations. The EPS of $1.19 comfortably beat estimates of $0.99 per share. On the earnings call, management pointed out that the growth was primarily coming from existing customers and there was potential for additional growth from hyperscalers, who continue to invest heavily in AI. 

Margins are expected to remain stable going forward, driven mainly by capacity utilization. The company is willing to enter long-term agreements with customers and management doesn’t see any issue with it. Some clarity or development on this front would also provide a trigger for the stock price to surge, as it could potentially signal a bottleneck, which has become a buzzword lately.

What Are Analysts Saying About Modine Manufacturing Stock?

Modine Manufacturing isn’t covered by a lot of analysts, but out of the 10 that do, nine have a “Strong Buy” rating. The stock has priced in much of the analyst optimism, which is why the upcoming earnings report is what everyone is waiting for. Expect analyst revisions after the earnings come out. If the forecast improves, MOD stock could become a hot stock among retail traders.