What Happened?
Shares of HVAC company Trane (NYSE:TT) jumped 8% in the afternoon session after the company reported impressive first quarter 2025 results, which beat analysts' revenue, EBITDA, and EPS expectations. Due to the "dynamic macro environment", the company maintained its full-year EPS guide rather than raising to reflect the beat. Zooming out, we think this was a solid quarter.
The shares closed the day at $382.97, up 8.2% from previous close.
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What The Market Is Telling Us
Trane Technologies’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 8.6% on the news that stocks heavily tied to the AI market took a hit after Chinese artificial intelligence startup DeepSeek released a new large language model that ranks competitively on key global benchmarks, uses less advanced semiconductor chips, costs significantly less to build, and already achieved strong adoption after topping the iPhone app for AI apps.
TT in particular supplies HVAC (heating, ventilation, air conditioning) to the datacenter market, which is being buoyed by AI.
Notably, DeepSeek open-sourced this model, a move that might make it harder for rivals to justify huge upfront expenditures on hardware, software, and expertise to develop similar systems.
Speaking at the World Economic Forum in Davos, Switzerland, Microsoft CEO Satya Nadella praised DeepSeek's efforts, calling the new model "super impressive" for its open-source design, efficient inference-time computing, and high compute efficiency. "We should take the developments out of China very, very seriously," he added.
Nadella's comments suggest that upstarts like DeepSeek could reshape the competitive landscape of AI. DeepSeek's announcement disrupts long-held assumptions in key ways: 1.) It undercuts the narrative that bigger budgets and access to top-tier chips are the only ways forward for AI development. 2.) By using less advanced hardware, DeepSeek opens the door for innovators who face high chip costs or export restrictions, reaffirming they can still compete. 3.) The model's success bring uncertainty to the growth narrative of companies that develop AI powered chips and the infrastructure that supports the production and maintenance of these AI tools, including datacenter servers, as well as the HVAC and water systems providers that cool datacenters.
Overall, the news revealed that the market saw more uncertainty in demand as DeepSeek demonstrated that top-tier infrastructure might not be as needed.
Trane Technologies is up 2.5% since the beginning of the year, and at $383.02 per share, it is trading close to its 52-week high of $419.14 from November 2024. Investors who bought $1,000 worth of Trane Technologies’s shares 5 years ago would now be looking at an investment worth $4,381.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. .