Hyperscalers Are Investing Heavily in Data Centers. These 3 Stocks Could Be Big Winners.

The technology industry is currently investing massive amounts of capital into new data centers to support the rapid expansion of artificial intelligence and cloud-based services. Hyperscalers are spending $700 billion on capital expenditures this year to build out these data centers, creating a generational investment cycle in power generation and grid modernization.

For companies like Quanta Services (NYSE: PWR), Vertiv (NYSE: VRT), and Eaton (NYSE: ETN), this massive spending could be the beginning of a supercycle for their respective industries. These companies benefit from strong positions across infrastructure, power, and cooling solutions, with these trends providing a powerful tailwind going forward.

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Quanta Services has made strategic acquisitions to capitalize on the infrastructure boom

Quanta Services provides turnkey infrastructure solutions that span the entire power delivery process, from constructing power generation facilities and high-voltage grid interconnections to the critical-path electrical systems inside the data centers. The company has positioned itself as a key partner for technology giants to help support this buildout.

Quanta has made strategic investments to strengthen its position in this growing market. In 2024, it acquired Cupertino Electric for approximately $2 billion, adding specialized low-voltage electrical engineering and modularization services tailored to the technology sector. It followed this up last year by acquiring Dynamic Systems for approximately $1.5 billion, providing it with mechanical, plumbing, and process infrastructure for large-load facilities, including data centers and industrial facilities.

The hyperscaler data center boom is a massive tailwind, as seen in its project backlog (the total value of work contracted but not yet completed). By the end of last year, Quanta's backlog surged to $44 billion, a 27.5% increase in the past year. Goldman Sachs analyst Ati Modak sees these trends driving strong earnings per share (EPS) growth of 17% to 18% compounded annually over the next five years.

Vertiv's prefab data center solutions to speed up time to market

Vertiv also provides data center infrastructure, including power management, cooling systems, integrated rack solutions, and related services such as maintenance. The robust investment from hyperscalers has led to unprecedented demand for Vertiv's products. In the fourth quarter, the company saw a staggering 252% year-over-year growth in organic orders. As a result, its total backlog more than doubled in one year, to a record $15.0 billion.

Hyperscalers are prioritizing speed to market to bring AI capacity online while managing power needs. To meet this need, Vertiv provides prefabricated infrastructure, such as Vertiv OneCore and SmartRun. These modular solutions allow hyperscalers to deploy 12.5-megawatt building blocks that can scale up to massive 2-gigawatt sites, reducing on-site construction time and complexity.

Vertiv is scaling its operational capacity to meet this robust demand, and announced it would increase its capital expenditures from a historical average of 2 to 3% of sales to 3 to 4% of sales this year to support anticipated revenue growth. Looking forward, Vertiv projects its total organic sales will grow by roughly 28% in 2026, generating approximately $13.5 billion in revenue.

Mega projects are driving strong growth for Eaton

Eaton is another supplier of power management and electrical components for data centers and industrial operators. The company is leaning into the robust demand for data centers, and last year it spent $9.5 billion to acquire Boyd Thermal, which specializes in liquid cooling systems needed to keep next-generation AI chips from overheating.

The acquisition is part of Eaton's broader "chip-to-grid" strategy, an end-to-end framework for managing extreme power and thermal demands in next-generation data centers. The company has noted a massive surge in "mega projects" (those valued at over $1 billion) and a $3 billion pipeline in North America. Eaton management notes the company has an impressive win rate of about 40% on its megaproject bids.

In the fourth quarter, Eaton's data center orders in the Electrical Americas segment surged by approximately 200% year-over-year. Data center revenue grew by 40% in the quarter, helping push the Electrical Americas segment's total backlog to an all-time record of $13.2 billion (a 31% increase).

Looking ahead, Eaton expects some margin pressure as it front-loads costs to ramp up capacity. In the longer term, analysts project Eaton's earnings per share to grow at double-digit rates annually over the next several years.

Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Quanta Services and Vertiv. The Motley Fool has a disclosure policy.