The AI Energy Economy — Part 3: The Intelligence Layer
— Industrial Automation, Cooling & Controls
Introduction
AI Is Reshaping the Entire Electricity System — and Three Distinct Categories of Companies Stand to Benefit
Artificial intelligence has triggered the largest surge in electricity demand in modern history.
Where past technologies — microchips, the internet, cloud computing — increased power needs gradually, AI data centers require gigawatt-scale electricity, ultra-stable voltage, and industrial-grade cooling. A single AI campus can consume as much power as a mid-sized city.
Because of this, the AI power story can’t be understood through a single lens. It spans every layer of the electricity system, from generation to transmission to automation. This series breaks the AI-electricity boom into three distinct parts, each representing a different investment universe:
Part 1 — The Power Producers – The Nuclear & Utility Winners of the AI Power Boom
These are the companies that produce the electricity for the AI era: nuclear operators, regulated utilities, and merchant power producers that will directly supply the massive new loads created by AI data centers. Companies include NEE, VST, CEG, D, DUK.
Part 2 — The Grid Builders — the Pick-and-Shovel Suppliers Powering AI Electrification
These companies provide the hardware: turbines, transformers, substations, transmission lines, HVDC systems, batteries, and grid equipment. They expand the physical infrastructure that delivers power to it’s needed. Companies include GE Vernova, Eaton (ETN), Quanta, ABB, Schneider, Siemens Energy, Fluence.
Part 3 — Industrial Automation, Cooling and Controls. Part 3 expands the focus to a third pillar of the AI power megacycle: Industrial automation, thermal management, power electronics, and cooling infrastructure.
These companies don’t generate electricity and build power plants. Instead, they ensure that:
- electricity flows where it needs to
- voltage remains stable
- substations operate safely
- data centers stay cool
- manufacturing lines scale to produce transformers, reactors, batteries, and turbines
- grid controls work in real time
- backup systems function during peak loads
This sector is crucial because AI-driven electricity demand doesn’t just require more generation — it requires smarter, automated, more efficient ways to manage that electricity inside factories, grids, and data centers.
These companies are the “neurons and circulation system” of the electrified AI world.
1. Emerson Electric (EMR)
Emerson is one of the foundational industrial companies enabling the AI power expansion. Its core businesses include:
- plant automation and control systems
- nuclear plant instrumentation and safety
- precision sensors and valve controls
- data-center monitoring and reliability systems
- industrial software for grid and plant operations
Why Emerson benefits from AI load growth
As more power plants, gas turbines, SMRs, substations, and battery farms come online, all of them require Emerson’s sensors, controls, and automation suites.
The AI era adds another dynamic:
- hyperscale data centers are now so large they require industrial-grade process control, not just IT infrastructure
- voltage stability and thermal reliability become mission-critical
- SMR developers rely heavily on deterministic safety systems, an Emerson specialty
Valuation
Emerson trades at roughly 23× earnings with forward estimates around 20×, slightly premium but not excessive for a high-quality industrial with strong margin expansion.
Financial health is solid:
- strong free cash flow
- good organic growth
- a long track record of operational excellence
📌 Rating: Buy
Emerson is attractively valued relative to peers and is one of the safest, most consistent ways to play the automation side of the AI electrification boom.
2. Honeywell (HON)
Honeywell operates at the intersection of energy, data centers, and industrial electrification. Its businesses include:
- building automation
- data-center cooling and heat management
- microgrid controls
- industrial cybersecurity (extremely important for utilities)
- gas detection and plant safety
- materials and sensors for advanced energy systems
Why Honeywell benefits from AI expansion
AI computing creates enormous thermal loads. Large data centers now require:
- high-efficiency HVAC
- advanced control systems
- airflow automation
- predictive maintenance tools
Honeywell is embedded in many hyperscaler campuses, and the energy transition further boosts its microgrid and industrial software units.
Valuation
Honeywell trades around 22× earnings, similar to the S&P 500 but with more industrial stability and less cyclicality.
Honeywell’s weakness is not its quality — it’s simply priced as a “steady compounder,” not a high-torque AI play.
📌 Rating: Hold
A fantastic long-term holding, but not cheap enough to call a Buy. A market pullback would change this.
3. Rockwell Automation (ROK)
Rockwell is the backbone of industrial automation in America — the “brains” that run factories producing the physical components of the electrification boom.
If the world needs:
- more transformers
- more turbines
- more switchgear
- more SMRs
- more substations
- more grid-scale batteries
…someone has to automate and scale the factories that build all these things. That “someone” is Rockwell.
Why Rockwell benefits from AI-driven electricity demand
Demand for energy hardware is surging, and manufacturers are racing to expand production. Rockwell automates:
- assembly lines
- robotics
- quality control
- process flows
- energy-optimized manufacturing
As SMRs move toward commercial production later this decade, Rockwell becomes indispensable.
Valuation
Rockwell trades at a 27–25× forward P/E, putting it firmly in the premium bucket.
This premium reflects:
- very high margins
- extremely strong competitive moats
- scarcity value as one of the few pure automation plays
📌 Rating: Hold
Great business, long-term winner, but price already reflects much of the growth. Buy on dips.
4. Vertiv (VRT)
Vertiv may be the single most direct beneficiary of the AI physical build-out outside of Nvidia.
Why? Because GPUs run hot. Very hot.
And AI clusters generate heat loads unlike anything on earth.
Vertiv provides:
- liquid cooling
- immersion cooling
- thermal management
- power conditioning
- high-reliability UPS systems
Every hyperscale AI cluster (Microsoft, Google, Meta, Amazon, Oracle) requires Vertiv-grade solutions to even function.
Why Vertiv benefits from AI load growth
AI cooling demand is growing faster than server demand itself.
A single GPU rack today may require 10–30× the cooling load of a 2019-era server.
Vertiv’s order backlog is exploding as hyperscalers build campuses measured in gigawatts.
Valuation
Vertiv trades at a 40× P/E and 30× forward P/E, which is undeniably expensive.
But its growth rate is also remarkably high:
- revenue comps ≈ +25–30%
- margin expansion
- massive multi-year demand visibility
📌 Rating: Hold
Expensive, but fairly valued given its growth. Not a Sell, because the theme is too strong. A pullback would make this a Buy.
5. Baker Hughes (BKR)
Baker Hughes may seem like an oilfield services company, but its emerging identity in this cycle is a provider of flexible firm-power turbines.
Its products include:
- small and mid-sized industrial turbines
- hydrogen-ready turbines
- aero-derivative gas turbines used for fast-ramping backup power
- energy technology components used in grid reliability systems
Why Baker Hughes benefits from AI electricity demand
AI data centers need instant, reliable backup power that:
- activates in seconds
- stabilizes frequency
- matches unpredictable load spikes
Aero-derivative turbines are perfect for this role, especially as grids saturate.
Governments, utilities, data centers, and microgrid operators are increasingly adopting this type of backup architecture.
Valuation
Baker Hughes trades at:
- 17× earnings; 15× forward earnings
- These valuations are unusually reasonable given the company’s earnings growth trajectory and new energy exposure.
📌 Rating: Buy
Well-priced, high-quality, strategically important, with a strong margin expansion story.
6. Rolls-Royce Holdings (RR)
Rolls-Royce is developing one of the most advanced SMR designs globally and is aggressively scaling its defense and civil aerospace divisions.
The SMR segment is especially interesting:
- UK government support
- potential U.S. partnerships
- a modular design aimed at 470 MW output
- manufacturability (one of its biggest advantages)
Why Rolls-Royce benefits from AI load growth
If SMRs move from concept to deployment, Rolls may become a dominant exporter of mid-sized nuclear power units ideal for:
- AI campuses
- industrial parks
- microgrid-like applications
- brownfield plant replacements
Valuation
- Rolls trades around 15× earnings and 13× forward, far cheaper than U.S. industrials with similar growth.
- Risks exist (execution, regulatory approvals), but the upside is meaningful.
📌 Rating: Spec Buy
High potential, higher risk, attractively priced for investors who want SMR exposure.
Hitachi Energy
Hitachi Energy (part of Hitachi Ltd.) is one of the world’s leaders in:
- HVDC transmission
- transformers
- high-voltage switchgear
- grid automation
- power electronics
Why it wins from AI growth
HVDC is becoming the backbone of long-distance renewable and nuclear integration.
AI clusters need multi-GW interconnects — exactly the type of hardware Hitachi dominates.
Valuation
As part of Hitachi Ltd., it trades at a reasonable blended valuation in the mid-teens earnings multiple.
📌 Rating: Buy
One of the cleanest ways to play HVDC and next-generation transmission.
8. Mitsubishi Electric
Mitsubishi Electric is deeply embedded in global power systems:
- Supervisory Control and Data Acquisition (SCADA) control systems
- transformers
- industrial power electronics
- automation technology
Why Mitsubishi Benefits From AI Electrification
AI-driven electricity demand puts enormous strain on the grid. Utilities must upgrade not only the physical hardware (transformers, substations, transmission lines), but also the control systems that operate the grid in real time. This is where SCADA and Mitsubishi come in.
What SCADA Is
SCADA stands for Supervisory Control and Data Acquisition — it is the central nervous system of the power grid.
A SCADA system:
- monitors everything on the grid (voltages, temperatures, power flows, faults)
- controls switches, breakers, substations, and distribution equipment
- sends instant alerts when something goes wrong
- automatically adjusts flows to keep the grid stable
- helps utilities prevent outages or cascading failures
If the grid is the body, SCADA is the brain and spinal cord — it constantly senses and reacts.
Why AI demand requires massive SCADA upgrades
AI data centers cause huge spikes in power usage, rapid changes in load, higher stress on substations and transmission lines, and greater need for real-time grid balancing.
Legacy SCADA systems were not designed for this level of load volatility or the need for millisecond-level control.
To handle AI-scale electricity demand, utilities require: next-generation SCADA, advanced sensors, real-time automation, intelligent power electronics, and predictive analytics and fault detection
This is exactly Mitsubishi Electric’s specialty.
Why Mitsubishi wins
Mitsubishi is one of the few global companies with deep expertise in:
- SCADA platforms
- high-voltage control equipment
- utility automation systems
- industrial electronics
- grid-stabilization hardware
As AI accelerates grid complexity, utilities increasingly turn to companies like Mitsubishi to modernize their control systems.
In short: More AI → more grid stress → more automation → more SCADA
Valuation
Mitsubishi trades at:
- 18× earnings; 15× forward P/E
- Reasonable for its quality and global footprint.
📌 Rating: Hold
Solid and dependable, but not dramatically undervalued relative to peers.
Mitsubishi Electric is rated a Hold not because it’s expensive, but because its AI-related upside is more limited than peers. The company has solid SCADA, automation, and high-voltage capabilities, but these strengths are spread across a very broad industrial portfolio, which dilutes its direct leverage to AI-driven electrification. Growth is steady rather than high-octane, margins are lower than rivals like ABB, Emerson, or Schneider, and Mitsubishi is not a top-tier supplier to hyperscale data centers or next-generation grid projects. It remains a high-quality, stable industrial — just not one of the most powerful risk/reward opportunities in the AI-energy theme.
Conclusion
Part 1 explains who generates the electricity.
Part 2 shows who builds the grid and hardware to deliver it.
Part 3 reveals who automates, cools, controls, and stabilizes the entire system.
The companies in Part 3 are generally more diversified and less cyclical than power producers. They offer longer-duration growth, sit at the heart of the manufacturing needed for new power plants and transmission, and benefit directly from both electrification and AI infrastructure spending.
They also win regardless of which energy source grows fastest. AI may accelerate demand for nuclear, gas, wind, solar, SMRs, batteries, or microgrids — but Part 3 companies supply the automation, cooling, controls, and electronics required for all of them.
That makes Part 3 the most stable and broadly leveraged way to invest in the AI-electricity megacycle — the layer that thrives no matter how the future energy mix evolves.
