The Grid Is the Bottleneck
Michael Homerick@homerick
−3.2%
since Sep 18
The idea
I think the AI buildout will drive years of investment in getting electricity where it needs to go. Companies are already spending, and I think national competition will keep the pressure on. Whatever produces the power, it still needs connections, transformers, substations and controls. I want the businesses building and upgrading that infrastructure. My bet is that delivering reliable electricity becomes one of the durable ways to invest in the AI boom over the next five to ten years.
What it owns
- Transformers, switchgear and power gear are required for every new grid connection, and current backlogs stretch years into the future. · Eaton CorporationIt makes the transformers, breakers and power distribution equipment that data centers and grid upgrades must purchase, positioning it at the center of electrical infrastructure spending., Hubbell IncorporatedIt makes connectors, enclosures and utility hardware that go into nearly every substation and line upgrade, earning revenue across the entire grid modernization spending wave., GE VernovaIt builds transformers and switchgear at a scale few competitors match, providing a direct indicator of whether the grid equipment buildout is actually accelerating as expected., nVent ElectricIt makes enclosures, fasteners and connection products that tie electrical systems together, including liquid cooling equipment for dense data centers requiring thousands of connection points., Vertiv HoldingsIt delivers power and cooling systems inside data centers driving demand for electricity, serving as an early warning signal for any slowdown in AI infrastructure capital spending., Powell IndustriesIt makes custom switchgear and substations for utilities and data centers competing for scarce electrical capacity, with swelling backlogs reflecting the bottleneck in power infrastructure.45%
- These contractors document their use of prefabrication and modular assembly in their own operations, meaning their growth can scale without proportional increases in headcount. · Quanta ServicesIt physically builds transmission lines and substations with documented robotics and automation programs embedded in its own field operations, not just customer operations., Comfort Systems USAIt builds modular, factory-assembled mechanical and electrical systems for data centers using documented automation in its own manufacturing rather than relying solely on field crews., EMCOR GroupIt uses prefabrication in its own shops to build electrical assemblies off-site, automating its own operations rather than relying purely on traditional field-crew construction methods.19%
- A diversified fund holding multiple grid modernization companies reduces the risk of backing the wrong individual winner while the broader grid investment theme unfolds. · First Trust Nasdaq Clean Edge Smart Grid ETFThis ETF holds a broad basket of grid modernization companies, including names not owned directly, cushioning the take if individual stock picks underperform while the grid investment theme continues.10%
- Software and metering systems that manage grids under heavier, more volatile demand from AI workloads scale without requiring large field crews. · ItronIt sells meters and software that utilities use to manage increasingly strained grids, with growth depending on continued spending for grid intelligence and software rather than just hardware.9%
- Electrical distributors take a small cut from every upgrade project without betting on any single product or technology, providing steady exposure to the overall buildout. · Wesco InternationalIt distributes electrical wire, cable and gear to contractors and utilities across the entire buildout, earning a cut of the overall spending without betting on any single product.7%
- Cash10%