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The growing need to feed power-hungry artificial intelligence models could benefit an under-the-radar power management stock, according to Wall Street analysts. Shares of Eaton have rallied more than 41% since the start of 2024 and are up about 103% over the past year. The company creates electrical components and power distribution systems, with exposure to a variety of end markets, including aerospace, automobiles and electric charging. ETN 1Y mountain Shares over the last year Wall Street expects skyrocketing AI interest to fuel growth in the grid market in a scramble to meet evolving power needs, as well as upgrades to electrical infrastructure to better handle AI adoption in data centers. Eaton, coupled with power management companies such as Vertiv , have been dubbed beneficiaries of this trend. Eaton is also bullish on the outlook for the data center end market, raising its compound annual growth rate , or CAGR, forecast for its global addressable market to roughly 25% between 2022 and 2025. Previously, the company called for a CAGR of 16%. Last year, Eaton also said that data centers and IT accounted for 14% of revenues. “As expected, the biggest increase is coming from the very strong demand for AI data centers, which is reflected both in our orders and in our negotiation pipeline,” said CEO Craig Arnold during an earnings call last month. “Here, orders on a trailing 12-month basis have more than doubled, and our negotiations in the U.S. have increased by more than 4x.” Ahead of Eaton’s quarterly print, Bank of America analyst Andrew Obin highlighted the stock as a “pure-play electrical equipment” with high-growth businesses beyond data centers. The company’s restructuring program should also boost margins. “While data center remains the strongest end market, it seems that other end markets (residential, distributed IT) improved more than expectations to drive beats,” he wrote. Elsewhere, Mizuho’s Brett Linzey highlighted Eaton’s “extended revenue visibility” given its “mega projects” aimed at meeting reshoring and data center needs. The firm’s $365 bull case implies 7% upside from Friday’s close. “We don’t envision significant multiple expansion for ETN from here but believe the stock can continue to grind higher in-line with earnings growth,” he wrote.
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