The rationale for launching our Powering AI strategy 18 months ago was that the sudden and massive acceleration in electricity demand would force utilities to sharply increase their investments in power generation and transmission, providing a powerful tailwind for equipment suppliers and engineering firms. This capex upside is now becoming clearer, as several major electric utilities have unveiled multi-year spending plans in recent weeks.
In the US, American Electric Power raised its five-year capex plan by 33% to $72 billion, citing new transmission projects and surging demand. Duke Energy, which had already increased its five-year plan by 14% to $83 billion earlier this year, announced on its latest earnings call that it will upgrade that plan once again to $95–105 billion in the coming weeks—representing a 30–45% capex upgrade in less than one year.
In Europe, Iberdrola unveiled a new EUR58 billion investment plan for 2025–2028, roughly a 30% increase versus its 2021–2024 plan. Of this, EUR37 billion is earmarked for transmission and EUR21 billion for renewable generation.
After decades of anemic electricity-demand growth and utility capex, the current power demand surge is challenging utilities as never before and is giving rise to what increasingly looks like a multi-year utility capex supercycle.
According to ratings agency Morningstar DBRS, investment in electricity infrastructure is projected to reach $1.4 trillion between 2025 and 2030—double the amount invested over the prior decade—as the rapid buildout of data centers compounds existing pressures related to decarbonization, renewable-integration, and grid reliability.
The impact of this capex boom is only beginning to show in the results and guidance of generation and transmission equipment providers. Siemens Energy, for instance, recently raised its mid-term targets for FY28: it now expects low-teens revenue CAGR (vs. high-single/low-double digits previously) and an EBIT margin of 14–16% (vs. consensus at 13.5%), leading to a 20% upward revision in consensus 2028 earnings.
Despite this, we believe the risk remains skewed to the upside. Revenue and margin assumptions still appear conservative given, notably, the pricing power equipment suppliers are likely to enjoy amid widespread shortages across the generation and transmission supply chain (including gas turbines, transformers, and switchgear).
Overall, we see 30–50% earnings upgrades as increasingly likely by 2028, matching utility capex increases (at least +30%, as outlined above). The earnings supercycle is then well on track and should materially compress valuation multiples that currently appear high for many of the power equipment stocks in our investment universe.
