Four of Europe’s oldest industrial groups have seen a significant increase in their market capitalization, totaling more than €150bn, due to the rising demand for data centers fueled by the surge in artificial intelligence. These European companies, specializing in the production of various electrical equipment, are at the forefront of providing the essential infrastructure for data centers that support large language models and cloud computing. Traditional manufacturers such as Legrand have experienced a doubling of their revenues in recent years, thanks to their involvement in the data center sector.
Franck Lemery, the chief financial officer of Legrand, emphasized that while they may not be investing billions like tech giants Microsoft and Meta, their business is thriving in relation to the increased spending on data centers. European players dominate the market for the infrastructure required for AI, despite the more prominent role played by American companies in the development of cutting-edge AI technologies.
Investors have taken notice of the potential in this sector. Since the launch of ChatGPT in November 2022, the market valuations of Schneider Electric, Siemens AG, ABB, and Legrand have collectively grown by €151bn. This represents a significant increase, with German-listed Siemens AG experiencing a growth of over 60% in market valuation.
While these industrial groups continue to supply electrical components for residential and industrial applications, data centers have emerged as their fastest-growing revenue source. The demand for computing power driven by AI models, gaming, cloud computing, and streaming services has propelled this growth. However, this focus on data centers has also exposed these companies to fluctuations in share prices, particularly during market downturns triggered by factors such as the launch of competing AI technologies or concerns over power supply constraints.
Despite these challenges, companies like Legrand remain optimistic about the long-term prospects of the data center industry. Analysts predict a significant increase in capital expenditure on data centers in the coming years, with total spending expected to exceed $1tn by 2028. This trend underscores the importance of data processing in various industries and the critical role played by companies providing the necessary infrastructure.
Schneider Electric
Schneider Electric, a leading provider of electrical equipment, has been at the forefront of the data center sector since its $6.1bn acquisition of American Power Conversion in 2006. This strategic move positioned the company to capitalize on the growing demand for electricity in data centers. Data centers accounted for approximately 24% of Schneider Electric’s orders in 2024, reflecting a steady increase from previous years.
The acquisition of American Power Conversion was initially met with skepticism from investors, but it enabled Schneider Electric to expand its offerings in critical power services, including generators essential for ensuring uninterrupted power supply to data centers. With a current valuation of €127.9bn, Schneider Electric has surpassed French oil major TotalEnergies, signaling a shift towards electric power in the global economy.
From software for monitoring data center infrastructure to cooling systems and racks for servers, Schneider Electric provides a wide range of solutions tailored to the needs of modern data centers. The company’s recent acquisition of a controlling interest in Motivair, a specialist in liquid cooling, further demonstrates its commitment to enhancing energy efficiency in data center operations.
According to Schneider CEO Olivier Blum, AI has brought about a fundamental shift in the IT and electrical infrastructure requirements. This underscores the company’s dedication to innovation and sustainability in addressing the evolving needs of data centers.
Legrand
Legrand, a French manufacturer known for its sockets and cables, has a rich history dating back to the 19th century. Originally focused on producing light switches and insulators, the company has transitioned towards serving the data center industry in recent years. Data center orders accounted for 20% of Legrand’s sales in 2024, marking a significant increase from previous years.
Looking ahead, Franck Lemery of Legrand expressed confidence in the continued growth of the data center vertical, expecting it to represent an even larger portion of sales in the coming years. The company has made strategic acquisitions to bolster its presence in the data center market, with a focus on enhancing its offerings to meet the evolving needs of customers.
Despite its strong position in the market, Legrand faces challenges such as tariffs on Chinese goods imposed by the US government. This external factor could impact the company’s bottom line, highlighting the interconnected nature of global trade and its impact on industrial players like Legrand.
ABB
ABB, a Swedish-Swiss electrical company, has diversified its product portfolio to include robotics, power generators, and solutions tailored for data centers. In recent years, ABB has seen a shift in sales towards data center-related offerings, reflecting the increasing demand for energy-efficient technologies in this sector.
Morten Wierod, CEO of ABB, emphasized the company’s collaboration with major data center operators to provide safe, reliable, and energy-efficient technologies to meet their growing energy needs. Data center orders accounted for 15% of the company’s total orders in 2024, showcasing the importance of this sector in driving ABB’s growth.
ABB’s solutions for data centers focus on ensuring availability, enhancing energy efficiency, and serving as backup systems for critical operations. The company’s commitment to sustainability is evident in its greener power systems, which offer a more environmentally friendly alternative to traditional diesel generators.
As the AI race intensifies and data center requirements continue to evolve, ABB is well-positioned to capitalize on the growing demand for energy-efficient technologies in this dynamic industry.
Data centers have become a crucial part of the digital infrastructure, with companies like Schneider Electric and Siemens AG investing heavily in this sector. However, recent reports have shown that stock market fluctuations for Schneider Electric were influenced by the cancellation of leasing contracts by Microsoft, one of its hyperscaler clients. Despite this setback, Schneider Electric remains a key player in the market, with the US accounting for 50% of its revenue for electrification.
On the other hand, German conglomerate Siemens AG has been making strides in the data center industry, increasing its focus on infrastructure to compete with its rivals. Analysts believe that Siemens and ABB have been catching up with their capabilities in this sector over the past few years, positioning themselves as strong contenders in the market.
Siemens AG has reported a significant increase in its data center business, with a growth of over 45% to approximately €1.3bn in the first half of the fiscal year. This growth has been driven by the company’s investments in technology infrastructure to meet the demands of the digital age. However, Siemens AG has faced challenges in its data center business, citing a pause in orders from a hyperscaler client as a reason for a 16% decrease in orders for electrical products like microgrid controllers.
As the demand for data centers continues to rise, companies like Schneider Electric and Siemens AG are expected to play a crucial role in shaping the future of digital infrastructure. With their expertise and investments in technology, these companies are well-positioned to capitalize on the growing market and drive innovation in the data center industry. the perspective of a wildlife biologist studying the habits and behaviors of a specific species of bird, the red-crowned crane.
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