The Power Revolution in the AI Computing Era: How Heavy Electrical Stocks Become the Next Growth Engine?

Power Supply Crisis in the AI Era: Why the Power Industry Faces a Decade of Opportunities

Over the past few decades, global electricity demand growth has been relatively stable and predictable, making power investment a field viewed as steady but lacking explosive growth. However, this situation has undergone a fundamental shift in the last three to five years.

The exponential growth of AI and data centers acts like a massive power consumption engine, with impacts on the power supply system far exceeding market expectations. Training a single large AI model consumes as much electricity as thousands of households do in a year. Today, hundreds of millions of users worldwide use AI tools like ChatGPT and Midjourney daily, requiring data centers to operate around the clock, resulting in astonishing electricity demand.

According to the International Energy Agency, global data center electricity consumption is projected to surpass 945 TWh by 2030, more than doubling current levels and approaching Japan’s annual electricity consumption. The electricity use of AI-specific data centers is growing even faster, expected to increase more than fourfold.

This demand has triggered a series of chain reactions: new power plants construction → grid infrastructure upgrades → modernization of distribution systems. Supporting this entire industry ecosystem are heavy electrical equipment companies, which supply core power devices such as transformers, GIS switchgear, and distribution panels.

Taiwan’s leading heavy electrical equipment company, Hua Cheng, has seen its stock price surge over 1600% since 2023, benefiting from this industry upgrade. This is not short-term speculation but a structural opportunity driven by the reshaping of the global energy landscape.

The Complete Ecosystem of the Heavy Electrical Industry: Who Benefits?

What is the core definition of heavy electrical concept stocks?

Simply put, heavy electrical concept stocks refer to listed companies engaged in manufacturing electrical equipment, engineering construction, and operation & maintenance services. From power generation, transmission, distribution to end-user electricity, all segments require their participation and support.

The performance of these companies is closely linked to national energy policies and infrastructure investments. When governments promote grid upgrades, energy transition, or companies increase green energy investments to cope with AI-driven surges in electricity demand, heavy electrical equipment firms are among the first to benefit.

Distribution of Heavy Electrical Industry Tiers

First Tier: The Four Giants of Heavy Electrical — Core Players in Power Equipment

These four companies focus on core transmission and distribution sectors, extending into emerging fields like energy storage and charging stations, with multiple growth drivers.

Hua Cheng (1519) is a leader in transformer technology in Taiwan and the only manufacturer in Taiwan capable of producing 500kV ultra-high voltage transformers, with the highest technical threshold. The company is expanding into energy storage and wind power sectors, benefiting from grid equipment procurement demands from Taipower and Texas, with strong export competitiveness.

Chung Hsin Electric (1513) is the sole producer of GIS (Gas Insulated Switchgear), a critical device in power grids. It plays an important role in Taipower’s resilient grid plan, holding about 85% market share and leading the industry. Its “iCharging” fast-charging brand has been deployed in strategic locations like highway service areas across Taiwan, targeting the charging market.

Shih Electric (1503) is an established electromechanical manufacturer with product lines covering heavy electrical equipment to electric vehicle power systems. It supplies major domestic projects for Taipower, metro, airports, and has successfully expanded into Southeast Asia and the Middle East, with stable and diverse orders.

A-Li (1514) specializes in power equipment and distribution panels, with strong potential in AI server power supply. Its clients include TSMC, UMC, and other semiconductor giants. Orders are booked through 2027, with profit margins continuing to grow in double digits.

Second Tier: Smart Meters and Distribution Systems

Kangshun (6282), Tatung (2371), Jiu Ding Power (4588), and others have established competitive advantages in smart meter fields, while also branching into automotive electronics and energy management.

Third Tier: Wire and Cable Suppliers

Hua Hsin (1605), Day-A (1609), Hong Tai (1612), and others supply high-end power cables, benefiting from ongoing orders driven by Taipower’s resilient grid projects.

Fourth Tier: Energy Storage Systems

Delta Electronics (2308), Tianyu (8171), and others provide integrated energy storage solutions, filling the gap for intermittent renewable energy.

Investment Logic for Heavy Electrical Stocks: Four Core Supports

1. The inevitability of global grid upgrades

The surge in electricity demand driven by AI and data centers puts unprecedented pressure on aging grids. From Taiwan to the US and Europe, countries are forced to undertake large-scale grid modernization investments, generating continuous orders for heavy electrical equipment manufacturers.

2. The irreversible trend of energy transition

Global commitments to net-zero carbon emissions have spurred large-scale solar and wind power construction. Each new renewable power plant requires supporting infrastructure like step-up substations, transformer stations, and transmission & distribution facilities—core businesses for heavy electrical companies. Meanwhile, rapid growth in energy storage systems makes heavy electrical firms key players in integrated power equipment.

3. Strong policy and capital support

Taiwan’s “Resilient Grid Plan” is expected to see Taipower 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, opening global markets for Taiwanese firms like Hua Cheng.

4. High technical barriers creating a moat

Heavy electrical equipment certification periods are long, and the technical difficulty is high, especially for ultra-high voltage products. Companies like Chung Hsin Electric in GIS and Hua Cheng in ultra-high voltage transformers hold oligopolistic positions, enabling sustained profitability.

Risks to Consider Before Investing in Heavy Electrical Stocks

Despite promising prospects, heavy electrical stocks face several challenges worth noting.

Valuation risk is primary. Leading stocks already trade at P/E ratios of 30-40x or higher, with the market pricing in years of growth expectations. If earnings growth falls short, stock prices could undergo significant corrections.

Cost pressures from fluctuations in raw materials like copper and steel can directly impact gross margins. Labor shortages and supply chain delays may also affect shipment schedules and revenue recognition.

Industry cycle considerations are also important. Currently, the industry is in a capital expenditure peak, but as global grid upgrade projects complete, order volumes will decline, and industry prosperity will stabilize.

Practical Investment Strategies for Heavy Electrical Stocks

If you decide to enter, consider the following:

Time horizon: Adopt a long-term perspective of 2-3 years or more to buffer short-term volatility, avoiding being misled by market fluctuations.

Entry method: Use phased or dollar-cost averaging approaches, buying gradually during market dips or corrections, to avoid chasing high prices in one go.

Monitoring indicators:

• Monthly revenue growth YoY, to assess if it aligns with market expectations
• Gross profit margin and operating profit margin, to evaluate if revenue growth translates into real profitability
• Inventory and accounts receivable levels, to check operational health

Taiwan Heavy Electrical Stocks vs. US Power Stocks: How to Choose?

Characteristics of Taiwan heavy electrical stocks

Taiwan’s heavy electrical growth mainly stems from domestic demand (Taipower’s resilient grid plan) and some exports. This means growth is somewhat dependent on regional policy budgets and grid upgrade speeds.

In the global supply chain, Taiwanese heavy electrical firms mainly act as “component suppliers,” producing transformers, GIS switchgear, distribution panels, etc. They are technologically advanced but product lines are relatively focused.

Advantages of US power stocks

US power stocks face a global demand market. Industry giants like Eaton and Siemens operate worldwide, with less regional limitation.

More importantly, US power stocks offer comprehensive system solutions from hardware to software, with stronger integration capabilities. Investing in US stocks effectively diversifies assets across the global economy, especially centered on the largest and most stable US economy, which can hedge against regional risks.

Notable US utility companies to watch

Opportunities in the US power supply chain

Besides direct investment in utility companies, investors can also focus on upstream power supply chain firms:

Note that these companies often experience performance volatility, with stock prices sensitive to order cycles and capital expenditure trends. Some small- and medium-sized firms may also face liquidity risks.

Conclusion

Whether choosing Taiwan heavy electrical stocks or US power stocks, heavy electrical shares have become vital tools for investing in global energy transition and AI-era power demands. The key is to align choices with your risk tolerance, investment horizon, and asset allocation goals to find the most suitable investment path.