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Long-Term Boom Expected for Power Equipment Industry Amid Surging Data Center Electricity Demand
"Re-Rating Opportunities Expand Beyond Market Leaders to Value Chain Latecomers"

As the era of artificial intelligence (AI) enters full swing, the global power infrastructure market is entering a new supercycle. With the expansion of AI data centers driving a surge in electricity demand, supply shortages are deepening across the entire power equipment sector—including transformers, switchgears, and cables—and as a result, the performance and valuations of related companies are being rapidly reassessed. In particular, beyond the major power equipment companies whose stock prices have already soared, there is growing interest in latecomers that have yet to garner sufficient market attention.

Park Heecheol, a researcher at Kyobo Securities, stated, "The core resources in the AI era are computing power and electricity," adding, "Investment in AI infrastructure has not slowed, and the need to secure vast amounts of computing power and the electricity to run it will only intensify going forward."

Indeed, global big tech firms are continuing to ramp up their investments. Following recent earnings announcements, the 12-month capital expenditure (Capex) forecasts for key hyperscalers—including Amazon, Google, Microsoft, and Meta—have been revised upward. Notably, as Google Cloud’s AI investments expand and profitability improves, it is being evaluated that a virtuous cycle of AI infrastructure investment is now firmly underway.

The pace of power consumption growth at AI data centers is also accelerating. Based on Nvidia GPUs, the representative AI accelerators, next-generation products are seeing a sharp increase in rack power usage. For example, Blackwell-based racks require about 3.3 times more power than previous Hopper-based racks, and the upcoming Rubin series is expected to require another 1.5 times more power than Blackwell.

Researcher Park explained, "Even though power efficiency continues to improve, the transition to inference scaling phases such as agentic AI has dramatically increased the intensity of computing power required. Structural growth in power consumption at AI data centers is expected."

According to the International Energy Agency (IEA), half of new power demand in the United States is attributable to data centers, and by 2028, data centers are projected to account for approximately 12% of total U.S. electricity consumption. Globally, data center power consumption is expected to increase from about 416 terawatt-hours (TWh) in 2024 to as much as 1,264 terawatt-hours by 2030.

As electricity demand surges, the power equipment industry has entered an unprecedented boom. This is because the expansion of power generation facilities must be accompanied by the development of transmission and distribution networks. Adding in demand for replacement of aging power grids, orders for companies specializing in transformers, switchgears, and cables are rising rapidly.

Park commented, "Simply upgrading aging power grids improves power efficiency by about 20%. The power equipment sector is entering a super-boom, driven by both the addition of new power sources and demand for replacement of outdated infrastructure."

The issue, however, lies in supply. The power equipment industry operates with a labor-intensive and inelastic supply structure, making rapid capacity expansion difficult even amidst soaring demand. In fact, the average lead time for extra-high-voltage transformers has lengthened from 1–2 years in the past to around 4 years recently. As a result, global power equipment companies are enjoying a strong seller’s market and commanding high valuations.

Over the past two years, the average trading volume for Korea’s top three heavy electric equipment companies has increased by about 238% compared to the previous three-year average, and their average market capitalization has expanded by roughly sixfold. Their order backlogs are also projected to triple by the end of this year compared to 2022, before AI-related demand began in earnest.

However, the market’s focus is now expanding beyond simple leaders to include latecomers as well. Park noted, "As the power equipment sector demonstrates high valuations in a high-growth environment, the inelastic supply structure means there are significant opportunities for related value chain and second-tier companies. The investment appeal of latecomers is very strong."

He cited the following conditions for the rerating of latecomers: ▲ verification of technological and business capabilities; ▲ proliferation of bottlenecks in the value chain; ▲ supply shortages among leading companies; and ▲ the potential for genuine profit leverage. In particular, he emphasized that securing order references in the North American market and entering the value chains of major global companies would be key variables.

Kyobo Securities identified SNCIS and KBI Metal as representative beneficiaries in this sector.

SNCIS is a specialized shipbuilding and marine equipment company that originated from Samsung Heavy Industries’ Electrical Team. It possesses competitiveness in switchgears, ship automation systems, and eco-friendly solutions, and has recently expanded its business scope into the land-based power market.

Its partnership with the global power equipment company ABB is regarded as a core growth driver. SNCIS has acquired certification as an ABB switchgear production partner, granting it the qualification to design, assemble, and sell ABB’s power equipment directly in international markets.

Park stated, "ABB’s production partner status demonstrates SNCIS’s ability to design and manufacture high-reliability power equipment that meets international standards, far beyond simple product assembly. Going forward, the company is expected to leverage ABB’s network to expand in both domestic and overseas data center markets."

ABB itself is also directly benefiting from the expansion of the data center business. ABB reported that orders for its Electrification division rose by 44% year-on-year in the first quarter, with data center segment orders more than doubling. This is due to the surging demand for medium- and low-voltage distribution systems driven by the increasing power density of AI data centers.

SNCIS recently secured Hanwha Ocean as a new major client, in addition to Samsung Heavy Industries. The company plans to expand its production capacity by approximately 2.5 times through the expansion of its Busan Plant 2, Geoje Marine Center, and Nantong plant in China.

Kyobo Securities forecasts that SNCIS’s revenue in 2027 will reach KRW 192.1 billion, up 20.8% year-on-year, with operating profit rising 35.5% to KRW 27.2 billion.

KBI Metal is also drawing attention as a beneficiary of the expansion of AI-powered power grids. KBI Metal has established a value chain that spans copper wire, cables, and transformers. Building on its existing non-ferrous metal processing business, it has recently expanded into cable and transformer segments, further strengthening its business portfolio.

In particular, KBI Metal is expanding its cable business in North America through its subsidiary KBI Cosmo Link. The share of revenue from the U.S. is reportedly around 40–50%, and exports of cables to the U.S. are rapidly increasing.

Park explained, "By completing a vertically integrated value chain from copper wire to cables, KBI Metal is expected to achieve significant fundamental improvement. Integrating its portfolio from raw material procurement to finished product manufacturing will expand both its cost competitiveness and profit-generating capacity."

KBI Metal also recently acquired Wonyoung Hi-Tech, a transformer manufacturer that had been undergoing rehabilitation procedures. Through this, the company aims to proactively respond to North American power grid replacement demand and the expansion of AI data center investments.

Kyobo Securities estimates that KBI Metal’s consolidated revenue in 2026 will reach KRW 985 billion, up 29.9% from the previous year, with operating profit rising 13.7% to KRW 27.7 billion.

Park emphasized, "As the power equipment boom is expected to continue alongside sustained AI investment, it is time to pay attention to latecomers that can narrow the valuation gap with the sector leaders."

This content was produced with the assistance of AI translation services.