Artificial intelligence models have been rapidly growing in power-hungry capacity, leading to an increased demand for efficient power management solutions. As companies and industries scramble to meet the evolving power needs of AI technology, under-the-radar stocks like Eaton are poised to benefit from this trend.
Eaton, a company that specializes in electrical components and power distribution systems, has seen its shares rally significantly in recent years. With exposure to various end markets such as aerospace, automobiles, and electric charging, Eaton is well-positioned to capitalize on the surge in AI interest. Wall Street analysts have identified Eaton as a beneficiary of the growing need for power management solutions in the grid market.
One of the key areas driving growth for Eaton is the data center market. The company has raised its compound annual growth rate forecast for its global addressable market to approximately 25% between 2022 and 2025, up from the previous estimate of 16%. Data centers and IT accounted for 14% of Eaton’s revenues last year, with a significant portion of this growth attributed to the demand for AI data centers.
Analysts like Bank of America’s Andrew Obin and Mizuho’s Brett Linzey have highlighted Eaton’s strong position in the electrical equipment sector. Obin sees Eaton as a “pure-play electrical equipment” company with high-growth potential in areas beyond data centers. The company’s restructuring program is expected to boost margins and drive overall performance. Linzey points to Eaton’s “extended revenue visibility” due to its involvement in “mega projects” aimed at meeting reshoring and data center needs.
Looking ahead, Eaton’s stock is poised for continued growth, with analysts projecting a 7% upside potential from current levels. While significant multiple expansion may not be on the horizon for Eaton, the stock is expected to continue its upward trajectory in line with earnings growth. With a strong foothold in the power management sector and exposure to key growth areas like AI data centers, Eaton is well-positioned to capitalize on the increasing demand for power solutions in a rapidly evolving technological landscape.
The rise of AI technology and the growing need for efficient power management solutions present lucrative opportunities for companies like Eaton to thrive in the market. As the demand for AI data centers continues to soar, Eaton’s expertise in electrical components and power distribution systems positions it as a key player in the industry. With a positive outlook and strong analyst recommendations, Eaton is poised for continued success in the evolving landscape of power management.