This power management company, which has doubled in value over the past year, has the potential to see significant gains from the increasing demand for AI-powered energy solutions.

As the demand for power-hungry artificial intelligence models continues to grow, Wall Street analysts are pointing to a potentially lucrative opportunity in an under-the-radar power management stock. Eaton, a company that creates electrical components and power distribution systems, has seen its shares rally more than 41% since the beginning of 2024 and is up about 103% over the past year. With exposure to various end markets such as aerospace, automobiles, and electric charging, Eaton is well-positioned to benefit from the increasing interest in AI technology.

Analysts believe that the surge in AI interest will drive growth in the grid market as companies scramble to meet evolving power needs and upgrade their electrical infrastructure to accommodate AI adoption in data centers. Eaton, along with other power management companies like Vertiv, are expected to be beneficiaries of this trend. Eaton is particularly optimistic about the outlook for the data center end market, raising its compound annual growth rate forecast for its global addressable market to approximately 25% between 2022 and 2025, up from a previous estimate of 16%. Data centers and IT accounted for 14% of Eaton’s revenues last year, with CEO Craig Arnold citing strong demand for AI data centers as a key driver of growth.

Bank of America analyst Andrew Obin sees Eaton as a “pure-play electrical equipment” stock with high-growth businesses beyond data centers. The company’s restructuring program is expected to boost margins, and Obin believes that the residential and distributed IT markets have shown stronger improvement than expected. Mizuho analyst Brett Linzey also highlights Eaton’s extended revenue visibility, pointing to “mega projects” aimed at meeting reshoring and data center needs. The firm’s $365 bull case implies a 7% upside from the stock’s Friday close, with Linzey anticipating continued growth in line with earnings.

Overall, analysts are optimistic about Eaton’s prospects in the evolving power management market driven by the increasing demand for AI technology. With a strong presence in various end markets and a focus on data center growth, Eaton is well-positioned to capitalize on the opportunities presented by the rising interest in AI. Investors are advised to keep an eye on Eaton as it continues to expand its presence in the power management sector and benefit from the growing demand for advanced electrical infrastructure to support AI applications.