Ford Finally Sparked Wall Street Interest. But Is It All Hype?

Ford Motor Company (NYSE: F) stock soared nearly 50% in May, as Wall Street began seeing the legacy automotive company as a hidden-gem infrastructure play as the demand for artificial intelligence (AI) and data center energy explodes. The stock has since given back about half of its May surge, and that gives investors who see long-term growth an opportunity to jump back in at a better price.

Here's why investors should be intrigued.

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Ford Energy provides a growing, stable revenue stream

In May, the Detroit automaker announced its wholly owned subsidiary, called Ford Energy, which will develop and offer a battery energy storage system (BESS) for utility customers, AI data centers, and other large industrial and commercial customers. Savvy investors may have seen this coming, but for the most part, Ford built the new business behind the scenes, securing supply chains and preparing manufacturing. Ford Energy will manufacture battery cells, assemble modules and containers, and offer sales and service support, which could be the lucrative part. That's because the automaker's Ford Energy DC block was designed to have a stable and predictable lifetime performance for about two decades.

Image source: Ford Motor Company.

To help connect the dots for investors wondering, AI data centers run intense workloads that put immense strain on the electrical grid. Ford's BESS give AI data centers security in the event of electrical grid fluctuations or blackouts, as the centers need an uninterrupted power supply. The systems will also provide power during AI workload spikes, charge when electricity is cheap, and discharge when prices peak, ultimately lowering costs and providing downtime protection.

"Energy storage is a new business, but they have the right technology," a collection of Morgan Stanley analysts led by Andrew Percoco wrote in a note. "[W]e see this as an opportunity for Ford to deploy capital into a strategic growth area with a structure that preserves operational control and regulatory alignment."

Lucrative or hype?

So Ford developed a product that solves real problems for AI data centers, among other customers, but how lucrative could it be? According to J.P. Morgan analysts, Ford Energy at full capacity -- it's targeting production of 20 gigawatt-hours of annual energy storage capacity -- the business could generate over $4 billion in annual revenue and roughly $250 million to $500 million in annual operating profit by the end of the decade. But the benefits for Ford investors don't stop there, as Ford Energy could use its underutilized electric-vehicle (EV) battery plants, which would help push its Model e division to profitability much sooner than from building scale with EVs alone. That's a huge deal when you consider that Ford's Model e division, responsible for its EVs, has lost more than $18 billion total between 2022 and the second quarter of 2026.

EDF Power Solutions has already signed a five-year agreement with Ford Energy to purchase up to 20 gigawatt-hours of large BESS, with deliveries set to begin in 2028. Here's the kicker: While this is a great move for Ford and its investors, the company is still make-or-break in its traditional businesses. If by 2030 Ford Energy indeed generates the high end of estimates, $500 million in operating profit, it moves the needle a bit compared with Ford's 2025 adjusted earnings before interest and taxes of $6.8 billion. For investors, that leaves it as an overlooked play on AI, with the caveat that it's mostly still a traditionally low-margin automaker. However, this low-margin narrative is changing as more high-margin software-defined business spreads throughout vehicles and services.

If you're looking for a pure-play AI stock, Ford won't be that. However, if you're an industrial or automotive investor looking for upside between the many options, this is a great development to identify and include in your investment thesis, because it can move the needle and it could continue to grow high-margin business at Ford.

JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.