Key Point
- Artificial intelligence industry names are up for bid on Wall Street.
- Johnson Controls and Carrier Global are among the companies seeing increased demand from AI players.
- Scott Strazik, CEO of GE Vernova, said smart grid technology is growing rapidly as demand for data centers increases.
The advent of artificial intelligence has soared the demand for data center and industrial components to prevent all AI chips from overheating. “The key for chipmakers with AI ambitions is to keep their data centers cool,” Melius Research analyst Jake Levinson told CNBC. Levinson said refrigeration technology manufacturers Carrier Global, Trane Technologies and Johnson Controls are all seeing increased demand for HVAC. Additionally, some companies create the infrastructure used to regulate temperatures, from Parker Hanafin's fluid connectors to Dover's industrial pumps used for liquid cooling. Shares are up 20% and 18%, respectively, since the beginning of the year. PH DOV YTD Mountain DOV and his PH year-to-date industrial experts also focus on his TE Connectivity, which specializes in industrial connectors that transmit electrical signals to servers in data centers. At TE's earnings conference, executives said they expect AI revenue next year to double to $400 million. Jefferies analysts are also bullish on industry giants like Caterpillar and Cummins, which sell backup power engines to data center owners. For Caterpillar in particular, first quarter generator sales were up 9% year over year. The company doesn't disclose its data center share, but Jefferies industry analyst Steven Volkman said about 25% of demand comes from data centers, which grew 15% to 20% year over year. It is estimated that “But they… [Caterpillar] “We are making capital investments to increase our capacity to manufacture large engines because we are constrained by production capacity,” Volkmann told CNBC. Another major company indirectly benefiting from the AI boom is the recently spun out GE Vernova and its electrification division. The company's control over power spending has boosted GE Bellnova's electrification division, which includes grid solutions, high-voltage switchgear, and transformer products. “We have to challenge ourselves and how we support that capacity increase,” CEO Scott Strzyk told CNBC. The company announced its first-quarter earnings in April, showing similar trends in transformers and switchgear, saying, “These areas are experiencing the healthiest growth now and over the next 90 days. I have a lot of work to do with my management team to ensure we have the ability to serve these growing markets. And that's one of my biggest priorities.
