Eaton Positioned as Critical Infrastructure Play Amid AI Data Center Expansion

The surge in artificial intelligence infrastructure spending is creating significant opportunities for companies operating behind the scenes. While many investors focus on the technology giants driving this buildout, companies providing the essential backbone—power systems, cooling solutions, and electrical infrastructure—are equally positioned to capitalize on this megatrend.

Eaton is emerging as one such beneficiary. The company specializes in electrical components that power and stabilize facility operations, offering a diverse portfolio including switchgears, transformers, power distribution units, uninterruptible power supplies, and energy storage solutions. Courtney Carlsen and the Motley Fool analyst team have highlighted Eaton as a compelling infrastructure play for investors seeking exposure to the AI buildout without direct tech stock exposure.

The $500 Billion Infrastructure Opportunity

Major cloud providers—Microsoft, Meta Platforms, and Amazon—have committed substantial capital to expanding AI data center capacity. According to Goldman Sachs research, hyperscalers are projected to spend $500 billion on artificial intelligence infrastructure this year alone. This massive capital deployment extends beyond servers and processors; it encompasses the entire supporting infrastructure ecosystem that ensures these facilities operate reliably and efficiently.

The scale of this opportunity cannot be overstated. Third-quarter megaproject announcements totaled $239 billion globally, with data center projects representing nearly half of this total. This activity underscores the intensity and durability of the AI infrastructure cycle.

Eaton’s Strategic Position in Liquid Cooling

Recognizing the structural demand shift, Eaton announced its intention to acquire Boyd Thermal, an established player in the liquid cooling industry. This acquisition, expected to close in the second quarter, significantly expands Eaton’s addressable market in a critical emerging sector.

Traditional data center infrastructure powered server racks consuming 10 to 15 kilowatts. Modern AI server racks, by contrast, demand 80 to 100 kilowatts—a five to tenfold increase. This dramatic power concentration creates a thermal management challenge that liquid cooling directly addresses. Industry projections indicate the global liquid-cooling market will grow at a compound annual rate of 35% through 2028, making this one of the fastest-expanding segments within the data center infrastructure ecosystem.

Demand Acceleration and Backlog Growth

The market is rewarding Eaton’s positioning with exceptional order growth. In the third quarter alone, data center orders surged 70% year-over-year, while data center sales grew 40%. More tellingly, the company’s Electrical Americas segment backlog has expanded 20% year-over-year, reaching $12 billion—a substantial war chest that provides visibility into future revenue.

These metrics reveal more than just cyclical demand; they demonstrate the structural nature of the AI infrastructure buildout. Order backlogs of this magnitude suggest Eaton and its competitors face capacity constraints rather than demand questions, a favorable dynamic for pricing and profitability.

The Pick-and-Shovel Thesis

Eaton exemplifies the “pick-and-shovel” investment thesis—companies that enable transformational technology trends without bearing the primary risk of the technology itself. While AI development depends on chip performance and algorithm breakthroughs, it equally depends on the infrastructure that houses and powers these systems.

Currently trading at 26.4 times forward earnings, Eaton reflects market recognition of its structural advantages. The primary risk remains hyperscaler capital discipline; any significant pullback in data center spending would pressure future earnings. However, industry commentary and order flows suggest such a pullback is unlikely in the near term.

The Multi-Year Infrastructure Cycle Ahead

The AI data center buildout represents a multi-year infrastructure cycle, likely to extend through the remainder of the decade. This extended timeline provides a sustained tailwind for companies embedded in the critical path of this buildout. For investors seeking infrastructure exposure to AI’s expansion without the volatility and execution risk of pure-play technology stocks, Eaton merits serious consideration as part of a diversified technology infrastructure portfolio.