The AI Energy Economy — Part 2: Pick-and-Shovel Suppliers Powering AI Electrification

The AI Energy Economy — Part 2: Pick-and-Shovel Suppliers Powering AI Electrification

1. Why AI Is Creating a Historic New Energy Supercycle

Artificial intelligence is no longer just a technology story — it has become an energy story. Modern AI models require enormous clusters of GPUs and specialized accelerators, and those systems consume staggering amounts of electricity. A single hyperscale AI campus can require hundreds of megawatts to multiple gigawatts of power — the equivalent of a mid-size city.

This growth is happening fast enough that U.S. regulators, grid operators, and utilities are converging on the same message: the electrical system is not ready. The bottlenecks aren’t abstract. They show up in three concrete constraints:

• Generation, especially firm 24/7 power like nuclear and gas
• Transmission, which is already congested in many regions
• Grid hardware, including transformers, substations, and high-voltage equipment

Even conservative forecasts suggest AI could push U.S. power demand up 15–25% within a decade. More aggressive forecasts — especially those tied to hyperscale GPU deployment — suggest demand rising 40% or more. That kind of sustained load growth hasn’t happened in the U.S. in nearly a century, and it forces a build-out across the entire system.

Meeting that demand will require new capacity at multiple levels: new nuclear plants and SMRs, new gas turbines, large renewable and battery installations, massive new transmission projects, and a huge expansion in transformers, substations, and high-voltage equipment. It will also require a smarter, more automated grid.

This is the backdrop for one of the most compelling investment themes of the decade: the pick-and-shovel companies that build the hardware for AI-driven electrification.

2. What “Pick-and-Shovel” Means in the AI Power Era

During the Gold Rush, the most reliable profits didn’t go to the miners. They went to the companies selling the tools — the shovels, rails, and equipment everyone needed regardless of who struck gold.

The same logic applies to the AI electrification boom.

Pick-and-shovel companies in this cycle don’t run power plants and don’t operate data centers. Instead, they build the physical infrastructure that both sides depend on. Their products and services show up everywhere electricity has to be produced, moved, stepped down, stabilized, and delivered.

In practice, that means these firms manufacture and install the core building blocks of electrification, including:

• turbines
• transformers
• high-voltage equipment
• transmission hardware
• nuclear components
• substations
• grid automation systems
• industrial electrical controls
• large-scale batteries
• software that optimizes and routes electricity

As AI accelerates demand for stable, high-capacity electricity, these firms become the essential suppliers of the entire system. They can benefit from every new grid upgrade, every data-center expansion, and every new generation project — regardless of whether utilities themselves are capped by regulation.

3. Why Pick-and-Shovel Plays Can Outperform Traditional Utilities

Utilities will absolutely benefit from rising electricity demand, particularly those serving high-growth regions like Virginia and Texas. But utilities face structural limits that pick-and-shovel companies often avoid.

Utilities are heavily regulated, their returns are capped by commissions, they operate within specific geographic footprints, and rate cases move slowly. Even when demand grows quickly, the financial upside often shows up gradually.

Pick-and-shovel companies operate differently. They sell across many regions and technologies. Every new power project — whether nuclear, gas, wind, solar, or storage — requires equipment, engineering, and grid hardware. These suppliers win regardless of which generation technology scales fastest.

They also tend to have a different margin profile. Once the engineering and manufacturing platform is built, incremental revenue can become highly profitable. When a GE Vernova turbine or Eaton system is sold, the margin on each additional unit can widen — especially in tight supply environments. And because many power-infrastructure projects run on multi-year cycles, these companies often build large backlogs that create visibility and durability.

Their risk profile is different too. Instead of depending on short-term power prices, pick-and-shovel names depend on long-term capital spending cycles — cycles that are strengthening dramatically as AI forces grid expansion.

4. The Major Pick-and-Shovel Players in AI Electrification

Below are the most important companies positioned for AI-driven electrification, with commentary on valuation, stock performance, profitability, and management.

Some companies in this series appear in more than one section. This is intentional. A small number of firms — most notably GE Vernova — operate across multiple layers of the AI energy system. Rather than being “one-layer” plays, they span the electrification stack, supplying physical grid hardware, system integration, and real-time control. GE Vernova appears throughout this series because it helps build the grid, connect its components, and keep the system operating as AI demand pushes infrastructure toward its limits.

A. GE Vernova (GEV)

The global supplier of power equipment — nuclear, gas, wind, grid, and software

GE Vernova sits at the center of the electricity supply chain. It builds everything from gas turbines (where it is a global leader) to nuclear reactor systems, grid-management software, high-voltage transformers, and wind turbines. In many ways, it’s the closest thing to a “pure play” on global electrification across multiple technologies.

Why GEV wins in the AI era

AI growth increases demand for nearly every product GE Vernova sells: gas turbines for firm power, nuclear systems for long-duration clean baseload, high-voltage equipment for grid expansion, and grid-automation software to manage increasingly complex power flows.

Investment considerations

Valuation: reasonable relative to its order backlog; not cheap, but not overstretched.

Profitability: improving sharply after GE restructuring; margins expanding.

Stock performance: strong since the spin-off; has not “run too far” given the growth outlook.

Management quality: widely viewed as excellent, especially in operational execution.

Bottom line: GEV is a cornerstone pick-and-shovel name with global upside.

B. Eaton (ETN)

The industrial electrical backbone for data centers and transmission systems

Eaton has emerged as one of the biggest winners of the electrification cycle because it sells what data centers and grids physically require: switchgear, distribution units, power controls, and protection hardware. In the AI era, power density and reliability requirements push more spending into exactly Eaton’s core categories.

Why Eaton wins

Every data center, substation, solar farm, SMR site, or transmission upgrade needs Eaton components. Eaton is not selling to the “AI narrative” — it’s selling to the physical requirements of safely distributing and protecting electricity at scale.

Investment considerations

Valuation: higher than historical averages because investors recognize its strategic position. Not overly stretched, but no longer cheap.

Profitability: very strong margins and excellent cash flow.

Stock performance: a steady long-term outperformer.

Management quality: considered among the best in industrials.

Bottom line: a quiet giant with dependable growth and limited downside.

C. Quanta Services (PWR)

America’s grid builder — transmission, distribution, and substation construction

Quanta is the company utilities call when they need to actually build the grid. AI load growth is forcing a wave of construction and upgrades: transmission lines, substations, and distribution improvements. Quanta is the de facto leader in this work.

Why Quanta wins

More generation — whether nuclear, gas, or renewables — creates more need for transmission and interconnection. Quanta’s business rises directly with national infrastructure spending.

Investment considerations

Valuation: high relative to earnings, but supported by decades-long structural demand.

Profitability: strong and steady; backlog continues to grow.

Stock performance: one of the best industrial performers over the past decade.

Management quality: excellent execution and deep industry relationships.

Bottom line: PWR is one of the safest long-term electrification investments.

D. Fluence (FLNC)

Grid-scale batteries and software — the brains of renewable balancing

Fluence, a joint venture of Siemens and AES, is a global leader in grid-scale battery systems and the software that optimizes them. As AI raises peak-power demand and increases volatility in load shapes, storage becomes more critical to keeping grids stable — especially as renewable penetration rises.

Why Fluence wins

Every new solar or wind project, and every grid that must buffer heavy AI loads, needs storage. Fluence also sells the optimization software utilities rely on to manage reliability under changing conditions.

Investment considerations

Valuation: high, because investors expect long-term hypergrowth.

Profitability: not fully mature; improving but still transitioning toward consistent earnings.

Stock performance: big swings; best suited for growth-oriented investors.

Management: strong technical leadership, still scaling commercial operations.

Bottom line: a high-upside, higher-volatility play on grid storage and AI-driven peaks.

E. ABB (ABB)

Industrial electrification, automation, and grid technology

ABB is a diversified global industrial company with deep roots in power electronics, high-voltage equipment, automation systems, and industrial robotics. It supplies utilities, factories, data centers, and electrification projects worldwide.

Why ABB wins

Its high-voltage products, industrial controls, and grid technologies are in direct demand across the AI and electrification boom. ABB’s global footprint gives it exposure beyond the U.S. build-out.

Investment considerations

Valuation: reasonable for a high-quality industrial; still attractive.

Profitability: strong margins and excellent balance sheet.

Stock performance: steady upward trend; not overheated.

Management: very strong operational discipline.

Bottom line: a lower-volatility, globally diversified electrification play.

F. Schneider Electric (SBGSY)

The electrical nervous system of data centers and microgrids

Schneider is a leading supplier of power conditioning, electrical enclosures, UPS systems, microgrids, and automation for data centers. It is deeply embedded in hyperscaler supply chains.

Why Schneider wins

As AI clusters grow, reliable, perfectly conditioned electricity becomes essential. Schneider provides the systems that maintain power quality and automate electrical infrastructure — the “operational layer” of electrified sites.

Investment considerations

Valuation: on the higher side, but justified by its leadership in data-center electrification.

Profitability: consistently strong.

Stock performance: a long-term compounder with international exposure.

Management: considered best-in-class in the electrical automation sector.

Bottom line: a must-own name for investors seeking direct exposure to data-center infrastructure.

G. Siemens Energy (ENR.DE / ADR: SMEGF)

HVDC transmission, turbines, and grid hardware

Siemens Energy is a global leader in gas turbines, HVDC transmission systems, and industrial transformers — all critical for the next decade of grid modernization.

Why Siemens Energy wins

AI data centers create both more demand and more congestion, especially across long distances. HVDC transmission, which Siemens leads globally, is essential for moving power efficiently and stabilizing strained grids.

Investment considerations

Valuation: lower due to past turbine issues, offering value for long-term investors.

Profitability: improving but still uneven; the grid division is strong.

Stock performance: recovering; has room to run if execution continues improving.

Management: mixed record, but currently stabilizing.

Bottom line: a global transmission and turbine powerhouse with significant upside if execution continues.

5. How to Think About Portfolio Construction

Pick-and-shovel stocks offer diversified, global exposure to the power megacycle AI is accelerating. One way to think about construction is to blend three “buckets” that behave differently:

Stable global electrification platforms:

GE Vernova (GEV), ABB, Schneider Electric, Siemens Energy

Direct U.S. grid build-out exposure:

Quanta Services (PWR), Eaton (ETN)

Growth-oriented storage exposure:

Fluence (FLNC)

These names benefit regardless of whether the next gigawatt of AI power comes from nuclear, gas, solar, wind, or storage — because they supply the infrastructure all of these technologies require.

6. Why Pick-and-Shovel Plays Belong Beside Utility and Nuclear Stocks

If you already invest in utilities like Constellation (CEG), Vistra (VST), NextEra (NEE), Dominion (D), or Duke (DUK), adding pick-and-shovel companies can create a more complete “AI energy” portfolio.

Utilities profit by selling electricity. Pick-and-shovel companies profit when utilities and grid operators spend money to expand and reinforce the system — building new plants, expanding transmission, upgrading substations, adding batteries, replacing transformers, and modernizing grid controls.

Those capital spending cycles tend to be long-duration and recurring. Even when electricity prices fall, infrastructure upgrades often continue because reliability requirements, interconnection queues, and replacement cycles don’t pause just because markets soften.

7. Conclusion: The AI Electrification Decade Has Begun

AI is the most electricity-intensive technology ever built, and its growth is reshaping global energy demand. No matter how quickly adoption scales — slow, medium, or explosive — the world will need more generation, more wires, more substations, more transformers, more storage, more automation, and more grid resilience.

The companies selling the tools, hardware, and systems behind this build-out — GE Vernova, Eaton, Quanta Services, ABB, Schneider Electric, Siemens Energy, and Fluence — are positioned to benefit across nearly every scenario. They are the durable, global pick-and-shovel winners of AI-driven electrification.

The AI Energy Economy Series:

• • The AI Energy Economy — Part 1: The Nuclear & Utility Winners of the AI Power Boom
  • The AI Energy Economy — Part 2: The Pick-and-Shovel Suppliers Powering AI Electrification
  • The AI Energy Economy — Part 3 (Revised): The Connective and Last-Meter Layers of AI Electrification
  • The AI Energy Economy — Part 4 (Revised): Industrial Automation, Cooling & Controls
  • The AI Energy Economy — Part 5 (Revised): Merchant Power, Nuclear Scarcity, and AI Contracts