Baron Funds, an investment management company, issued a "little hat fund" of investor letters for the first quarter of 2025. A copy of the letter can be downloaded here. In the first quarter of 2025, the fund fell 9.07% (institutional stocks) compared to the return of the Russell 2000 Growth Index (index)-11.12%. Small-cap stocks performed more and meaningfully, so the fund lagged behind the Russell 3000 index, which fell 4.72% in the quarter. Also, check the fund’s top five holdings to see its best options for 2025.

In its first-quarter 2025 investor letter, Small Hat Fund highlighted stocks such as Vertiv Holdings Co (NYSE: VRT). Vertiv Holdings Co (NYSE:VRT) designs, manufactures and serves critical digital infrastructure technologies and lifecycle services in critical data centers, communication networks, and commercial and industrial environments. Vertiv Holdings Co (NYSE:VRT) has a one-month return of 20.88%, and its stock has lost 1.91% of its value in the past 52 weeks. On May 23, 2025, Vertiv Holdings Co (NYSE:VRT) stock closed at $104.14 with a market value of $39.69 billion.

Baron Small Hat Fund pointed out the following about Vertiv Holdings Co (NYSE:VRT) in its Q1 2025 investor letter:

“Share Vertiv Holdings Co (NYSE:VRT) is a provider of power, cooling and infrastructure solutions for data centers, which sells sharply in the quarter after the introduction of the surprisingly efficient DeepSeek AI application, which has caused investors to worry that the demand for capital expenditure in data centers is less than the capital expenditure in projection, rather than the speed of projection, and slows it down accordingly at Vertiv's growth rate. Additionally, following a strong performance in 2024, investors feared that the upcoming quarterly orders might slow down as customers experienced a digestive period of related spending and therefore revaluated the entire sector. We believe Vertiv maintains its competitive advantage and will benefit from increased capital expenditures and a complex roadmap related to the introduction of new chips, which will be hotter and require more advanced cooling solutions. We believe that the stock's value is attractive against the backdrop of its long-term growth potential. ”

Close-up of a group of technicians working in complex data center systems.

Vertiv Holdings Co (NYSE:VRT) is not among the 30 most popular stocks in hedge funds. According to our database, at the end of the first quarter, 90 hedge fund portfolios held Vertiv Holdings Co (NYSE:VRT), compared with 92 in the previous quarter. Although we acknowledge the potential of Vertiv Holdings Co (NYSE:VRT) as an investment, our belief is that AI stocks have greater hope to offer higher returns and do so in a shorter time frame. If you are looking for AI stocks that are as promising as NVIDIA, but whose earnings are trading at less than 5 times the price, check out our report on undervalued AI stocks.