Key facts
- AI data center stocks are down a median 23% since Oct. 6.
- Big Tech companies are down only 5% in the same period.
- Transformer supply is running about 15% short this year.
- Transformer makers have lead times of up to 26 months.
- GE Vernova has a $176 billion backlog.
- Quanta Services' backlog hit a record $53.4 billion.
Wall Street has recently punished companies that build and equip AI data centers, despite no evidence of orders drying up. These stocks are down a median 23% since October 6, while Big Tech companies are down only 5%. Several major builders and power suppliers have lost significant market value, including GE Vernova, Eaton, and Quanta Services. The primary constraint for the AI build-out is power, with U.S. transformer supply facing a 15% shortage this year and lead times stretching to 26 months. This situation benefits companies involved in building turbines, transformers, switchgear, and batteries. GE Vernova, which spun off from GE in 2024, has a $176 billion backlog and is a poster child for the power crunch. While its gas turbine order book is strong, its wind segment has been a weak spot. The company is set to report earnings soon, with investors watching for continued order book growth. Quanta Services is addressing supply chain bottlenecks by entering into a joint venture to manufacture high-voltage circuit breakers. The company reported strong second-quarter results, exceeding expectations with revenue up 41% and a record backlog. Eaton has expanded its presence in the data center business through acquisitions and is experiencing strong demand across its markets. However, recent acquisitions have increased its debt. Powell Industries, a long-standing maker of electrical distribution gear, has seen its backlog surpass $2 billion for the first time, partly due to a large data center order. The company is expanding its fabrication capacity to meet demand. Fluence Energy, a battery storage maker, has seen a significant increase in orders and backlog. However, the company is facing challenges with the ramp-up of its new manufacturing plant in Houston.