AI Factories Create Winners and Losers in Power Equipment Market

cr)yng9nof2yv)3lk}mftnkr_media_dl_1.png Bloomberg

Article content

(Bloomberg) — Next-generation AI factories are forcing power equipment firms to rethink their portfolios in the race to profit from a market expected to be worth more than $200 billion a year.

Article content

Artificial intelligence players are working toward a new type of data center — more powerful, more compact and more energy efficient. That’s forcing companies like Schneider Electric SE and Siemens AG, which provide the electrical equipment integral to server farms, to future-proof their offerings. 

Article content

Article content

Article content

“It is this big technological shift that will ultimately drive and set the scene for which company is best positioned to outperform,” Bloomberg Intelligence analyst Omid Vaziri said. 

Article content

Article content

The potential data center equipment market will be worth around $220 billion annually over the next five years, according to RBC Europe analyst Mark Fielding, a figure that has more than tripled since 2024, when the estimate was $60 billion per year.

Article content

That opportunity has grown as next-generation AI factories become the next frontier in data centers.

Article content

Today’s data centers typically run on alternating current, which is converted into direct current for chips to operate. But better AI performance requires higher density in data center racks, which requires higher voltages. 

Article content

The holy grail is an 800-volt DC system, which can carry almost three times more power than today’s AC cables, Fielding said. 

Article content

The transition is likely to happen in stages. Companies like France’s Schneider or Germany’s Siemens are developing so-called 800-volt DC sidecars to help existing data centers support more power-hungry AI servers. The technology, which splits pure IT racks and those that fulfill ancillary functions, is a bridge rather than the goal, BI’s Vaziri said.

Article content

Article content

“Today’s data centers are predominantly AC and will remain operational for 20 to 30 years,” said Ciaran Flanagan, global head of data center solutions and services at Siemens. Sidecars “allow operators to introduce 800 VDC for high-density AI workloads without replacing existing infrastructure.”

Article content

The longer-term goal is an 800-volt DC architecture built around a solid-state transformer, according to RBC’s Fielding. The device combines several power conversion stages into one to reduce energy losses.

Article content

That shift could upend parts of today’s data center supply chain. Uninterruptible power supply systems, which account for roughly 16% of data center infrastructure costs, could become less important because a solid-state transformer eliminates some of the conversion stages they perform.

Article content

Power distribution units, conventional transformers, switchgear and backup generators are among products that could see demand decline if the new architecture becomes widespread. 

Article content

Winners and Losers

Article content

Legrand SA — Schneider’s smaller French peer — is heavily exposed to power distribution units, leaving it more vulnerable if newer power architectures reduce demand for the equipment.