Powering the AI Era

For more than two years, we’ve been talking about the electrification theme, and today, we hold many positions in our portfolios that reflect meaningful exposure to companies poised to benefit. This piece offers a deeper exploration of the topic and reiterates our long-term bullish view.

The Aging Power Grid

Electricity demand generated by artificial intelligence (AI) is rapidly outpacing the capacity for existing power grids. Currently, over 70% of the grid is more than 25 years old. This aging system is under increasing pressure from growing data center usage, electrification, and expansion of energy sources. Future electricity demand is projected to grow significantly, and the National Electrical Manufacturers Association (NEMA) reports that over the next 15 years, the amount of storage connected to the U.S. electricity grid will grow by 1,100%.^[1]

AI development requires large-scale data center buildouts to support the hardware that’s needed for processing. These facilities can demand hundreds of megawatts of power each, with some exceeding a gigawatt – enough to power a small city or even a small state. Currently, data centers consume 4.4% of U.S. power supply, with estimates that this could grow to 9% by 2030^[2]. This increased demand is putting a strain on power grids, raising the necessity to a power grid update.

Industrial companies are at the forefront of this power and grid expansion; the higher consumption can translate to increased revenue and higher earnings. Furthermore, the demand for electricity derives from demand for data centers, which necessitates significant investment in infrastructure upgrades. For companies involved in traditional power generation, grid expansion and renewal, and electrical infrastructure upgrades, the outlook is compelling.

Electrification remains a key investment theme across our portfolios. We continue to maintain exposure to select leaders in the U.S. electrical, automation, and broader industrial sectors, reflecting our long-term conviction in these areas.

Chart 1: U.S. Electricity Consumption Index^[3]

The Bellwether for Industrial Automation

Recently, we saw very strong earnings from ABB Group (ABBNY). Their recent Q2 2025 results revealed a record $9.8 billion in order intake, a 16% y/y jump. This further underscored the structural shift in demand for industrial automation and electrification solutions. The recent surge for ABB is driven by the global expansion of data center infrastructure, along with a broader push to automate manufacturing and energy systems.

This is notable because ABB is viewed as an important bellwether for U.S. electrical, automation, and industrial stocks. The strong order growth and margin expansion are a good read on other electrical companies that we believe are ripe to grow.

These results are bolstering confidence in industrial and electrical automation, brushing off any concerns about sluggish global growth and ongoing trade tensions. This momentum suggests that businesses are still eager to invest in next-generation infrastructure and are striving to boost productivity. These results are indicative of robust demand for industrial and electrical expansion, again, a theme we have been focused on for quite some time.

The Electrical Beneficiaries

The global power landscape is undergoing a profound transformation, driven by AI innovation and surging electricity demand from data centers, manufacturing, and electrification. This shift is creating long-term opportunities across the infrastructure and power management ecosystem.

Two companies very involved in this transition are Quanta Services (PWR) and Eaton Corporation (ETN) . Both play critical roles in enabling the modernization of energy systems and supporting the buildout of next-generation infrastructure^[4].

Quanta Services is one of North America’s largest specialized infrastructure contractors, with a strong presence in grid modernization and renewable energy integration. As of Q1 2025, the company reported a record backlog of $35.3 billion, reflecting robust demand across transmission, solar, and data center projects. Its recent acquisition of Cupertino Electric signals a strategic move into the growing data center infrastructure space.

Eaton Corporation is a major provider of power management technologies, serving utility, industrial, and commercial markets. In 2024, its data center segment grew by 45%, outpacing broader electrical demand. In Q1 2025, Eaton reported $3.01 billion in net sales, up 11% year-over-year, with nearly half of that coming from its Electrical Americas segment. Its “Data Center as a Grid” approach exemplifies how companies are innovating to meet rising energy demands while enabling grid flexibility.

The Electricity Outlook

After decades of relatively stable electricity demand, the U.S. is now experiencing a surge in power consumption, driven by artificial intelligence. By 2030, power demand is expected to increase around 17% from 2024 levels.

To meet the expected increase in demand, the electric power sector is experiencing unprecedented growth in capital investment. In 2024, the power sector’s capital investment reached an all-time high of $179 billion, with continued growth projected in the years ahead. In this increasingly complex environment, electric companies are helping to forge the path to a more reliable, resilient, and affordable electric grid to support sustained demand growth.

Chart 2: U.S. Electric and Multi-Utility Capex^[5]

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Sources

^[1] Source: Utility Dive, As of April 2025.

^[2] Source: EESI, As of April 2025.

^[3] Source: Utility Dive, As of April 2025.

^[4] Source: Global X, As of March 2025.

^[5] Source: Deloitte, As of February 2025.

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.