AI-Fuelled Demand Powers Europe’s Electrification Champions

The “picks-and-shovels” trade is alive and well on this side of the Atlantic. Since the release of ChatGPT in November 2022, Schneider Electric, Siemens AG, ABB and Legrand have together added roughly €151 billion to their market capitalisations, a rise of c. 40 – 60 per cent that far outstrips the broader Stoxx 600 Industrial index.

From switchgear to silicon highways

Hyperscalers and cloud providers are throwing capital at new data-centre capacity – Dell’Oro projects global DC capex to jump from ≈US $600 billion in 2025 to >US $1 trillion by 2028.

Apex Group

Unlike the “front-of-house” AI names, Europe’s old-line electricals sell the substations, UPS systems, busbars and liquid-cooling rigs that keep those server barns running. The margin profile is attractive: razor-thin semiconductor ASPs this is not – critical-power kit often ships at high-20s EBITDA margins with mid-teens ROIC.

Company check-in

Group	2025 e Market Cap	Data-centre exposure	Recent highlights
Schneider Electric	€124 bn	24 % of orders (2024)	75 % stake in Motivair (liquid cooling) for US $850 m; first racks qualified for Nvidia GB200 boards.
Legrand	€35 bn (PX)	20 % of sales (2024) – double 2019	Q1-25 organic growth 7.6 %, driven by “outstanding” DC demand; warns up to US $200 m hit from potential Trump 50 – 60 % tariffs on Chinese inputs.
ABB	CHF 78 bn	15 % of electrification orders (2024)	Order CAGR 23 % (’19-’23). CEO says DeepSeek sell-off hasn’t dented DC capex pipelines.
Siemens AG	€143 bn	c. €1.3 bn H1-FY25 DC revenue (+45 % y/y)	Smart Infrastructure margin guide 17-18 %. Playing catch-up after late pivot.

The investment case – and the wrinkles

Structural tail-winds

• Power hunger: European DC electricity demand is on track to rise from ≈96 TWh in 2024 to 168 TWh by 2030 – a 75 % uplift.

• Regulatory pull: The updated Energy Efficiency Directive forces DCs >300 kW to hit 50 % renewable power and report PUE from Jan 2025. More kit, sensors and monitoring software mean bigger TAM for the vendors.

Valuation snapshot

Schneider now trades on ~27× FY-25e P/E vs 22× pre-AI, a narrower discount to US peer Eaton’s 29× (market cap US $126 bn).

ABB has re-rated from 15× to ~21× as investors bake in sustained >20 % DC order growth, yet still sits below Vertiv’s 33× (US $42 bn cap).

Risks

• Grid bottlenecks: Connection queues in Frankfurt-FLAP and Dublin could defer projects; National Grid in the UK is already floating locational pricing.

• Policy volatility: EU is weighing a “simplification omnibus” that may dilute efficiency mandates – potentially delaying retrofit spend.

• Capex digestion: If AI inference starts to outpace training, the capex curve could flatten in 2026-27 – watch shipment guidance from Nvidia/Hyperscalers.

MY TAKE

• Overweight Schneider & ABB – strongest pricing power, mix tilting towards software-enabled services; optional ESG premium as liquid-cooling and micro-grids gain traction.

• Hold Siemens – still inexpensive (<12× EV/EBITDA) but execution risk high while it scales DC offering.

• Underweight Legrand near-term – tariff overhang and FX exposure could clip consensus EPS by c. 5 %.

Some stats

• Global DC capex 2025-28 CAGR: 18 % (Dell’Oro)

• EU DC power-demand CAGR ’24-’30: 9.9 %

• Schneider DC order share: +500 bps in two years

• ABB DC order CAGR ’19-’23: 23 %