Wall Street analysts say low-profile power management stocks could benefit from the growing need to power electricity-hungry artificial intelligence models. Eaton shares have risen more than 41% since the start of 2024 and are up about 103% over the past year. The company develops electrical components and power distribution systems and has a presence in a variety of end markets, including aerospace, automotive and charging. ETN 1Y Mountain Shares Over the past year, Wall Street has predicted that the surge in interest in AI will drive grid market growth in the race to meet evolving power demands, as well as lead to upgrades to electrical infrastructure to better handle AI deployments in data centers. Eaton, coupled with power management companies such as Vertiv, has been called a beneficiary of this trend. Eaton is also bullish on its data center end market outlook, raising its global target market compound annual growth rate (CAGR) forecast from 2022 to 2025 to about 25%. The company previously expected a CAGR of 16%. Last year, Eaton also said data centers and IT accounted for 14% of revenue. “As expected, the largest increase was driven by very strong demand for AI data centers, which is reflected in both our orders and negotiations pipeline,” CEO Craig Arnold said in an earnings call last month. “Orders here have more than doubled over the past 12 months, and U.S. negotiations have increased more than fourfold.” Ahead of Eaton’s quarterly report, Bank of America analyst Andrew Obin highlighted the stock as a “pure electric equipment” with high-growth businesses beyond data centers. The company’s restructuring program should also boost margins. “While data centers remain the strongest end market, other end markets (residential, distributed IT) improved more than expected and appear to have driven the better-than-expected performance,” he wrote. Meanwhile, Mizuho’s Brett Lindsay highlighted Eaton’s “expanding earnings outlook” due to reshoring and “megaprojects” aimed at filling data center needs. The company’s $365 bull case suggests a 7% upside from Friday’s close. “While we do not envision a significant expansion in the ETN’s multiple from here, we believe the stock price will continue to rise in line with earnings growth,” he wrote.
This power management stock could benefit big from AI-driven energy demand
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