Car supplier Valeo shares soar on bets over data centre growth

By Danilo Masoni and Mathias de Rozario

MILAN, June 3 (Reuters) - Shares in Valeo jumped 18% on Wednesday as investors warmed to the French car parts supplier after analysts pointed to growth potential in data centres and energy storage.

J.P. Morgan and Jefferies highlighted Valeo's power and thermal management capabilities, particularly in battery energy storage systems (BESS) and data centre liquid cooling, as potential drivers of higher valuations.

The surge - the biggest since the recovery from the COVID-19 selloff in March 2020 - comes just two months after the stock hit its lowest level in more than 16 years, reflecting broader weakness in the European auto sector.

Valeo was not immediately available to comment.

J.P. Morgan said Valeo was taking advantage of its expertise in artificial intelligence, automation and advanced cooling technologies to expand beyond its core automotive business. It said the data centre liquid cooling market was expected to reach $50 billion by 2035.

"This sovereign approach, relying on Western-sourced components, has positioned Valeo as a reliable partner in both defense and industrial automation," the bank said after hosting its annual auto conference.

Investors have shunned the wider auto sector due to concerns over Chinese competition, the EV transition and U.S. tariffs, but have rewarded companies expanding into areas such as defence and robotics, viewed as the physical frontier of AI.

Schaeffler, for example, has been an early beneficiary of plans to develop humanoid robotics.

Valeo shares are now up about 40% so far this year, compared with a 10% fall for the STOXX Auto index.

Jefferies echoed J.P. Morgan's view.

"Potential for growth from power & thermal management opportunities (BESS, data centres) is gaining momentum, and could begin to turn into a real story for Valeo over the coming year," it wrote.

In April, Valeo reported a rise in first-quarter sales, beating market expectations despite continued weakness in the automotive industry.

By 1406 GMT, the stock was the biggest gainer on Europe's region-wide STOXX 600 index.

(Reporting by Danilo Masoni and Mathias de RosarioEditing by Tomasz Janowski)