The era of power shortages is coming! How will AI data centers rewrite the fate of heavy electricity stocks? Analyzing industry opportunities among the "Big Four" heavy electricity companies and energy storage concept stocks

From Stability to Explosion: How AI Ignites Heavy Electrical Concept Stocks

The traditional power industry has long been viewed by the market as a “stable dividend payer with slow growth,” with relatively easy electricity demand forecasting and straightforward investment logic. But everything changed with the rise of AI and data centers.

According to data from the International Energy Agency (IEA), global data centers’ electricity consumption will double by 2030 compared to today, reaching approximately 945 TWh, surpassing Japan’s total annual electricity usage. The electricity growth for AI-specific data centers is even more astonishing, projected to increase over fourfold. This massive power demand wave has directly brought the once-unremarkable heavy electrical equipment manufacturers into the spotlight.

Taking Taiwan’s one of the four major heavy electrical companies, Huacheng (1519), as an example, its stock price has surged over 1600% since 2023. This figure itself tells a story: the market has recognized the opportunity for a major upgrade in power infrastructure.

Why Will AI Spark a Power Revolution?

Training large AI models like GPT-4 consumes as much electricity as several thousand households’ annual usage. Behind this is the need for massive computing power clusters running continuously for weeks or even months. With hundreds of millions of users daily utilizing AI tools like ChatGPT and Midjourney, the data centers supporting these applications must operate 24/7, generating staggering electricity consumption.

Tech giants such as Microsoft, Google, Meta, Amazon, and TSMC have publicly announced significant increases in AI data center investments. This demand chain reaction causes:

AI computing power demand → Data center electricity surge → Grid load pressure peaks → Heavy electrical equipment market heats up → Heavy electrical industry enters a ten-year opportunity

To meet this electricity demand, countries are compelled to build new power plants (especially wind and solar), and upgrade aging power grids simultaneously. This wave of upgrades directly drives the expansion of substations and transformer stations, with core equipment—transformers, gas-insulated switches (GIS), and distribution panels—becoming the hottest procurement items in the market.

Heavy Electrical Industry Panorama: From Equipment to Systems

“Heavy electrical concept stocks” broadly refer to listed companies engaged in manufacturing heavy electrical equipment, engineering contracting, and system integration.

These companies form the foundation of the entire power industry chain, from generation, transmission, distribution to end-use electricity. Their performance is closely linked to national energy policies, infrastructure investments, and when governments promote grid upgrades, energy transition, or push green energy and energy storage due to AI-driven electricity demand, these companies are the first beneficiaries.

Analysis of Taiwan’s Four Heavy Electrical Giants

Huacheng (1519): The Hidden Champion of Ultra High Voltage Technology

• Taiwan’s leading manufacturer of transformers, with the only 500kV ultra high voltage transformer production line in Taiwan, with a high technical barrier that competitors find hard to replicate
• Business has expanded into energy storage and wind power sectors, with diversified growth momentum
• Strong export capability, successfully entered the Texas power grid procurement projects in the US, benefiting from global grid upgrades

Zhongxing Electric (1513): The Absolute Leader in GIS

• Taiwan’s only producer of GIS (gas-insulated switches), a critical component in modern power grids
• Plays a core role in Taipower’s resilient grid plan, with about 85% market share, making its dominance hard to challenge
• Its charging brand “iCharging” has deployed strategic locations such as highway service areas across Taiwan, targeting EV charging opportunities

Shidian (1503): A Comprehensive Power Engineering Integrator

• An established electromechanical giant, with product lines covering heavy electrical equipment, transformers, EV power systems, and more
• Steadily supplies major projects for Taipower, metro systems, airports, and exports to Southeast Asia and the Middle East
• Reputable brand, stable performance in government tenders, with diversified revenue sources

A-Li (1514): A Rising Star in AI Server Power Supply Systems

• Focuses on manufacturing power equipment and distribution panels, with clients including TSMC, UMC, and other semiconductor giants
• Directly benefits from wafer fab expansions and huge power demands of AI data centers
• Orders are full through 2027, with EPS continuously maintaining double-digit growth, demonstrating strong profitability

Diversified Layout of Energy Storage and Related Concept Stocks

Energy Storage System Manufacturers

• Delta Electronics (2308): Offers integrated energy storage cabinets and complete solutions for grid-level power dispatching platforms
• Tianyu (8171): Specializes in commercial, industrial, and residential energy storage systems, a key component supplier in energy storage concepts

Smart Meters and Distribution Solutions

• Commscope (6282): Major manufacturer of smart meters, branching into automotive electronics and energy management
• Tatung (2371): Develops smart meter and distribution system integration solutions
• Jiuding Power (4588): A frequent winner of Taipower tenders, providing innovative meter solutions

Upstream Supply Chain for Wires and Cables

• Walsin (1605): Leading supplier of high-end copper materials and power cables, actively布局新能源产业
• Dayuan (1609): Leader in power cables and enameled wire, investing in solar and energy storage through subsidiaries
• Hongtai (1612): Manufacturer of copper wires and power cables, benefiting from Taipower’s resilient grid plan

Investment Logic for Heavy Electrical Stocks: Why Now Is the Time

Four Major Catalysts Supporting Industry Growth

First, global grid upgrades are inevitable. Driven by AI and data centers, electricity demand surges, and aging grids worldwide—Taiwan, the US, Europe—must undergo large-scale upgrades. Additionally, EV proliferation and expansion of high-end manufacturing continue to boost electricity consumption, ensuring heavy electrical equipment orders keep flowing.

Second, the irreversible trend of energy transition. Countries’ net-zero carbon commitments accelerate solar and wind farm construction. Each green energy plant requires substations, transformers, and transmission/distribution equipment—core businesses of heavy electrical companies. To address the intermittency of green energy, energy storage concept stocks and energy storage system construction are rapidly expanding, making heavy electrical firms key integrators in the industry chain.

Third, strong policy and capital support. Taiwan’s “Resilient Grid Plan” will invest over NT$500 billion in the next decade, providing long-term stable orders for related companies. The US Inflation Reduction Act offers massive subsidies to promote grid modernization and green energy development, opening global markets for companies like Huacheng.

Fourth, industry barriers create an oligopoly. Heavy electrical equipment involves high technical barriers and long certification cycles, especially for ultra high voltage products (500kV transformers, 345kV GIS). The market is not fully competitive. Leading firms’ oligopoly advantage can sustain long-term profitability, forming a solid moat.

Prudent Reflection Before Investing: Risks and Challenges

Despite promising prospects, investors should recognize the practical difficulties faced by heavy electrical stocks.

Valuation Premiums

The market has already priced in growth expectations years ahead. Leading stocks’ P/E ratios generally exceed 30-40x, indicating valuation premiums. If profits do not grow as expected, share prices may face significant correction.

Cost and Supply Chain Pressures

Fluctuations in raw materials like copper and steel directly erode gross margins. The industry also faces labor shortages and supply chain delays, affecting order shipments and revenue recognition schedules.

Industry Cycle Risks

While currently at a capital expenditure peak, once major grid upgrade projects are completed, order peaks will gradually subside, and industry prosperity may return to a more stable level.

Practical Investment Strategies: How to Participate in Heavy Electrical Opportunities

The four heavy electrical giants are indeed entering a rare ten-year industry upcycle, driven by policies, domestic demand, and exports—fundamentals are unquestionable. However, stock prices in 2023–2024 have already reflected these expectations, with P/E ratios generally above 20–30x.

Recommended Investment Approaches

Adopt phased entry or dollar-cost averaging strategies, buying incrementally during market fluctuations or corrections, avoiding chasing highs all at once. This industry’s positive cycle requires time to ferment; a long-term perspective of 2–3 years can help buffer short-term volatility.

Monitoring Key Financial Indicators

• Monthly revenue growth rate and annual momentum—whether aligned with market expectations
• Gross profit margin and operating margin—whether they translate revenue growth into actual profits
• Inventory and accounts receivable cycles—whether they remain healthy

Taiwan Stocks vs. US Stocks in Heavy Electrical Investment: How to Choose

Advantages and Limitations of Taiwan Heavy Electrical Stocks

Taiwan’s heavy electrical concept stocks are more suitable for investors without US account access, preferring the domestic market. Growth mainly comes from Taipower’s resilient grid plan and some exports (e.g., Huacheng’s entry into the US market), which means growth is somewhat limited by regional policies and grid upgrade speed. Industry focus is mainly on transformers, GIS, and distribution panels—technologies leading but mostly acting as component suppliers in the global supply chain.

US Heavy Electrical Stocks with a Global Perspective

US stocks like Eaton and Siemens face global demand, with operations spanning worldwide power grids, electrification, and industrial automation, less constrained by regional factors. These companies provide comprehensive system solutions, integrating hardware and software, with stronger overall capabilities. Investing in US heavy electrical stocks effectively diversifies assets across the global economy, especially within the largest and most stable US economy, helping hedge regional risks.

Key US Power Utility Stocks

Upstream Supply Chain Investment Opportunities

When investing in upstream supply chain companies, note that their performance tends to be more volatile than utilities, heavily influenced by order cycles and capital expenditure trends. Some small- and mid-cap firms may face liquidity risks; careful selection and timing are advised.