We’re going to need a great deal of new electricity in order to provide power for all of the AI tools. In March, Tesla (NASDAQ:TSLA) CEO Elon Musk stated that the U.S. would suffer electricity outages in 2025 because of the power consumption of AI. Meanwhile, many electric utilities have said that more power plants will be needed. This is leading investors to begin to look at which electrical equipment stocks they should buy.
For example, Sempra (NYSE:SRE), which supplies power in California and Texas, is sounding the alarm about the datacenters which are being built. It says that in order to support AI there is the need for thousands of megawatts of additional electricity. And, a great deal of equipment will have to be purchased in order to run the new power plants. Consequently, the top and bottom-lines of companies that sell electrical equipment are likely to grow very quickly in the coming years. Here are three of the top electrical equipment stocks to buy.
GE Vernova (GEV)
GE Vernova (NYSE:GEV) stock has slumped recently after threats of a potential executive order from former President Donald Trump. He has said he plans to issue an executive order curtailing wind power if he becomes president again. The company is a major supplier of wind turbines.
But, if he makes it back into the White House, the most Trump could do is prevent wind projects from being deployed on public land and stop auctioning off portions of U.S. coastal waters for wind projects. However, many big data center owners such as Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) are pledging to rely on renewable energy for their electricity needs. This means the demand for wind power in the U.S. is going to expand tremendously no matter what happens in Washington.
Meanwhile, GE Vernova also generates a great deal of its revenue from selling and servicing natural gas turbines. Last month Goldman Sachs reported that Natural gas is expected to supply 60% of the power demand growth from AI and data centers. Finally, GEV supplies many other types of electrical equipment, such as transformers and circuit breakers.
Given its exposure to multiple, strong portions of the electrical equipment sector, GE Vernova is one of the best electrical equipment stocks to buy.
Powell Industries (POWL)
Powell Industries (NASDAQ:POWL) sells various types of customized electrical equipment. In other words, the firm designs equipment in order to meet the needs of its individual customers in various industries.
On April 30, POWL reported superb financial results for Q2 2024. During the period, its revenue jumped 49% year-over-year to $255 million. Meanwhile, its new orders soared 19% versus the end of Q4 2023 to $235 million. Moreover, the firm’s gross margin increased by over 5% in Q1 2024 to 24.6%. And, its net income came in at $33.5 million, up from $8.5 million in Q1 2023.
Powell’s CFO Michael Metcalf has said that the company’s core end markets are exhibiting favorable dynamics and activity levels to support our growth.
Eaton Corporation (ETN)
Eaton (NYSE:ETN) sells electrical components. This includes items such as wiring devices, circuit protection products and utility power distribution products. As of the end of 2023, billionaire Ken Griffin owned 1.26 million shares of ETN stock. Further, he increased his holdings of the name by 70% in Q4 of 2023.
In Q1 2024, Eaton’s revenue advanced 8%, excluding acquisitions and divestments, year-over-year. And its operating cash flow climbed 42% YOY to $475 million. Plus, its electrical business is really taking off as the unit’s backlog increased 27% YOY.
Also importantly, Eaton raised its 2024 EPS guidance, excluding certain items, to $10.20-$10.60, versus its previous outlook of $9.95-$10.35. If the company’s EPS comes in at the midpoint of the range, its EPS will jump 14% this year.
On the date of publication, Larry Ramer held a long position in GEV. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
