By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists generally agree that industrial suppliers like nVent, Emerson, and Hubbell are logical extensions of the AI trade but caution that they are cyclical and sensitive to hyperscaler capex cycles. They also highlight potential risks such as margin compression due to raw material cost fluctuations, substitution risks, and the slowdown in data center spending post-2026.
Risk: The slowdown in data center spending post-2026 and the potential for margin compression due to raw material cost fluctuations or substitution risks.
Opportunity: Potential sustained pricing power and margins due to copper supply bottlenecks.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
If you watched Nvidia and the other semiconductor chip stocks soar and felt as if the artificial intelligence (AI) train left without you, take a breath. The thing about AI is that it doesn't run on software alone. It runs on a staggering amount of physical stuff: cooling systems, power controls, transmission lines, and the crews who install them all.
Some industrial companies supplying the backbone materials and services for AI haven't been bid up nearly as far as the marquee names, which means the door isn't closed. Here are three industrial stocks that still look worth a serious look.
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nVent Electric (NYSE: NVT) sits right in the sweet spot of one of AI's biggest headaches: excess heat. Packing thousands of scorching-hot chips into a data center requires advanced liquid cooling, and nVent has become a go-to supplier, having deployed more than 2 gigawatts of liquid cooling capacity already. Its momentum is real, with recent quarterly sales up more than 50% and its systems-protection business up even faster, and it was added to Nvidia's partner network, a stamp of approval that opens doors with the largest AI builders. With a next-generation cooling and power lineup rolling out in 2026, nVent is a direct play on data center growth that has flown under most investors' radars compared with the flashier cooling names.
Emerson Electric (NYSE: EMR) is the sleep-well option of the group. It makes the automation and power-management systems that keep complex facilities running, and data centers have become a booming market for it. Emerson was chosen to automate the on-site power generation for a massive 1.7-gigawatt AI data center, and orders for its flagship control platform recently jumped 74%, driven largely by these behind-the-meter power projects.
What I like here is the balance: Emerson is a Dividend King (a Dividend King is a company that's grown its dividend payment for at least 50 consecutive years. It has 69 straight years of payout increases and trades at a far more grounded valuation than pure AI plays. You get genuine AI exposure without paying a nosebleed price, plus a growing dividend while you wait.
Hubbell (NYSE: HUBB) is the quiet backbone of the group. It makes the unglamorous but essential electrical and grid gear, the connectors, enclosures, and utility hardware, that both power companies and data centers rely on to move electricity safely. As AI drives a surge in data center construction, Hubbell has leaned in hard: It recently lifted its 2026 profit forecast on strong demand from data centers and utilities, and it has been bolting on acquisitions, including DMC Power and a roughly $3 billion deal for NSI Industries, to deepen its reach into data-center power infrastructure. Both its electrical and utility segments are growing at double-digit rates. It's a silent leader in a market for data center electrical infrastructure worth tens of billions, and it typically trades at a friendlier valuation than the pure-play AI names.
Let me be honest, because "screaming buy" can be a dangerous phrase. None of these three stocks is dirt cheap now that the market has caught on to the AI-infrastructure story. They are more reasonably priced than Nvidia and the headline cooling and power stocks, but they aren't bargain-bin. All three also depend on having data center construction stay hot, so a pullback in that spending would hurt them all. These are relative values riding a powerful trend, not risk-free giveaways.
Here is the encouraging part: You didn't miss the whole AI trade, just the most obvious slice of it. The build-out still needs cooling, power, and grid connections for years to come, and nVent, Emerson, and Hubbell each sell something essential to that effort at prices friendlier than the stocks everyone already talks about. I would treat them as a second chance to invest in AI through the back door, buying gradually and keeping the data center cycle in mind. Sometimes the smartest way to catch a train you missed is to hop on at the next station.
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Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Emerson Electric and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"AI infrastructure tailwinds are real but already largely reflected in these stocks’ current multiples, leaving limited margin of safety if hyperscaler spending slows."
The article correctly identifies that AI's physical infrastructure layer—cooling, power management, electrical distribution—remains in early innings relative to hyperscaler capex. nVent (NVT) has shown genuine 50%+ revenue acceleration and Nvidia partnership validation; Emerson (EMR) benefits from 74% order growth in behind-the-meter power while offering a 69-year dividend streak at a mid-teens forward P/E; Hubbell (HUBB) is riding double-digit segment growth plus strategic acquisitions. These are not yet priced like pure-play AI names (NVDA at ~35x forward). However, the piece underplays how much of the 2025-2026 data-center build is already baked into current valuations and how sensitive these industrials are to any hyperscaler capex digestion phase.
A near-term pause in data-center capex—already signaled by some Big Tech CFOs tempering 2025 guidance—could trigger multiple compression across all three names, erasing their “reasonable valuation” premium as growth normalizes to high-single digits and they re-rate toward traditional industrial multiples.
"The valuation premium currently applied to these industrial stocks assumes a perpetual, non-cyclical acceleration in data center infrastructure spending that ignores historical capital expenditure volatility."
The pivot to 'picks and shovels' infrastructure plays like nVent (NVT), Emerson (EMR), and Hubbell (HUBB) is a logical extension of the AI trade, but investors must distinguish between cyclical demand and structural growth. While these firms provide essential cooling and power management, they are trading at historically high multiples relative to their industrial roots. For instance, HUBB trading at ~25x forward earnings is a premium for a company tethered to utility capex cycles. The real risk here isn't just a data center slowdown; it's the potential for margin compression if raw material costs for copper and steel continue to fluctuate, offsetting the pricing power these firms currently enjoy.
These industrials are essentially playing the role of utility-adjacent commodities; if AI power demand growth plateaus due to grid capacity constraints, these stocks will face a severe multiple contraction.
"These stocks offer genuine AI exposure at lower multiples than semiconductors, but the article underestimates the cliff risk when data center capex cycles down, and omits critical margin and leverage metrics needed to assess true value."
The article frames industrial suppliers (NVT, EMR, HUBB) as 'second-chance' AI plays, but conflates two distinct narratives: near-term data center capex (real, visible) versus structural margin expansion (assumed, not proven). nVent's 50% sales growth is impressive, but the article doesn't disclose gross margins, capex intensity, or customer concentration—critical for evaluating sustainability. Emerson's 74% order jump for control systems is a leading indicator, yet the dividend-king framing obscures that utilities and on-site power are cyclical, not perpetual growth engines. Hubbell's acquisitions (NSI for ~$3B) suggest management sees value, but also signal they're buying growth rather than organically generating it. The real risk: data center spending is front-loaded into 2024–2026; once the infrastructure backbone is built, replacement cycles are far slower.
If data center capex normalizes post-2026 (a plausible scenario given the massive build-out already underway), these industrials revert to low-single-digit organic growth with elevated debt from acquisitions, making current valuations indefensible relative to their historical multiples.
"AI infrastructure spending remains cyclical; these backdoor AI plays carry meaningful downside risk if data-center capex slows."
Article correctly flags AI's physical backbone—cooling, power, and grid gear—as a data-center growth lever and highlights nVent, Emerson, and Hubbell. It notes capacity, orders, and partnerships (NVT's 2 GW cooling, EMR on-site power for 1.7 GW, HUBB acquisitions) as evidence of AI exposure. The risk is these are cyclical industrials, not AI monopolies; a pullback in hyperscaler capex or faster efficiency improvements could slow orders for years. Valuations may look reasonable versus Nvidia, but upside depends on a stubborn, multi-year data-center cycle and HUBB's integration success.
Yet the counter-case is that hyperscalers are unlikely to throttle AI capex for long, and cooling/automation vendors could ride a durable demand tail. In a late-cycle, high-rate environment, this group's valuations may compress if earnings growth disappoints or if M&A bets (like HUBB's) fail to deliver price benefits.
"Copper supply constraints could extend margin tailwinds well past 2026 capex peak."
Claude correctly flags post-2026 replacement-cycle risk, but all four overlook copper supply bottlenecks. Global refined copper output grows <2% annually while data-center + electrification demand surges 8-10%; this could sustain pricing power and margins for NVT/EMR/HUBB far beyond initial build-out, turning cyclical industrials into structurally leveraged plays.
"Industrial suppliers face margin compression from potential material substitution and goodwill impairment if acquisition-led growth strategies fail during a capex cycle slowdown."
Grok’s copper bottleneck thesis assumes pricing power remains intact, but he ignores the 'substitution risk' inherent in industrial electrical components. If copper costs spike, hyperscalers will demand aluminum or alternative conductor designs, pressuring margins for NVT and HUBB. Furthermore, Claude correctly identifies the acquisition-heavy growth strategy; if these firms overpay for inorganic growth during a commodity supercycle, they risk massive goodwill impairment when the hyperscaler capex cycle inevitably cools, regardless of copper supply constraints.
"Hyperscaler buyer power, not commodity scarcity, will be the margin killer for these industrials once the 2024–2026 build-out plateaus."
Gemini's substitution risk is real but overstated. Aluminum conductors in high-power distribution face thermal and efficiency penalties hyperscalers won't tolerate at scale—switching costs exceed copper premiums. More pressing: Grok and Gemini both assume pricing power persists, but neither addresses that hyperscalers have massive negotiating leverage. NVT/EMR/HUBB are mission-critical but not irreplaceable; bulk orders compress margins faster than copper supply tightens them. The acquisition debt Claude flagged becomes toxic if order growth decelerates to mid-single digits post-2026.
"Water-energy constraints could cap data-center capex and compress margins/multiples for NVT, EMR, and HUBB, even if copper bottlenecks persist."
One overlooked lever is the water-energy nexus. Even with copper supply tightness, data-center expansions face regional water scarcity and drought-era restrictions that push cooling costs higher and capex timelines longer. Hyperscalers are increasingly experimenting with dry/air cooling in arid regions; if such shifts scale, incremental spend on power distribution and cooling gear could slow faster than copper tightness would suggest, pressuring NVT/EMR/HUBB margins and multiples.
The panelists generally agree that industrial suppliers like nVent, Emerson, and Hubbell are logical extensions of the AI trade but caution that they are cyclical and sensitive to hyperscaler capex cycles. They also highlight potential risks such as margin compression due to raw material cost fluctuations, substitution risks, and the slowdown in data center spending post-2026.
Potential sustained pricing power and margins due to copper supply bottlenecks.
The slowdown in data center spending post-2026 and the potential for margin compression due to raw material cost fluctuations or substitution risks.