AI Expansion Drives Unrelenting Power Demand... "Power Equipment Stocks Will Continue to Rise"

Increased Data Center Power Demand Forecast
US Accelerates Power Infrastructure Expansion to Secure AI Superiority
Focus on Future US Utility Facility Investments

The stock performance of the power equipment sector remains robust. Expectations are rising that domestic companies providing power infrastructure will benefit long-term as power demand forecasts are revised upward due to the all-encompassing penetration of artificial intelligence (AI).

According to the Korea Exchange on the 9th, HD Hyundai Electric closed at 400,000 KRW the previous day, marking a 15.34% increase over the past month. Other domestic power equipment-related stocks such as Jeryong Electric (30.98%), Iljin Electric (23.66%), Sanil Electric (21.09%), and LS ELECTRIC (18.45%) also showed strong gains. These stocks had undergone corrections in the second half of last year after giving back the gains from the first half but have recently attempted a rebound amid continued upward revisions in global power demand forecasts.

The driving force behind the rally in the power equipment sector has been the steadily strengthening power demand from AI data centers. Last month, a research institute under the U.S. Department of Energy (DOE) projected that data center power demand, which accounted for only 4% of total U.S. power consumption in 2023, could increase to as much as 12% by 2028. Kim Yoon-jung, a researcher at LS Securities, stated, "As AI technology becomes more sophisticated and its applications diversify, server demand increases accordingly. We expect an increase in power infrastructure due to the upward revision of data center power demand forecasts." She added, "The valuation of domestic power equipment companies still falls short of the 12-month forward price-to-earnings ratio (PER) average of global competitors, which is an attractive factor."

Furthermore, the reshoring of manufacturing (relocating overseas production facilities back to the domestic market) and increased checks on China, which are expected to accelerate under the incoming U.S. President Donald Trump taking office on the 20th, are also considered factors stimulating the need to expand power infrastructure within the U.S. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., commented, "Domestic power equipment companies could continue to benefit from the demand for power grid infrastructure that will arise as Trump promotes a technological gap in advanced industries such as AI." He observed, "Power equipment is like jeans and pickaxes in the AI era. Benefits will be prolonged across major issues including AI, electric vehicles, aging power grid replacement, and carbon neutrality."

Particular attention should be paid to transformers, which play a key role in power supply routes. Lee Min-jae, a researcher at NH Investment & Securities, noted, "Long-term growth in the U.S. market is expected for EHV (extra-high voltage) transformers included in the transmission sector and special transformers related to renewable energy, benefiting companies such as HD Hyundai Electric, LS ELECTRIC, Hyosung Heavy Industries, and Sanil Electric." He added, "Future capital expenditure (CAPEX) forecasts presented by U.S. utility companies will allow us to confirm the scale and proportion of investments."