Buying interest rebounds after the power-equipment pullback, but market disagreement over a cycle peak widens

Overview

This report summarizes JPMorgan's discussions with approximately 60 clients across the United States, Europe, and Asia since late July. The power-equipment sector has declined notably since the second quarter, prompting investors to reassess risk-reward. Interest in buying quality Korean and Chinese names on dips has increased, but concerns over the durability of the capex cycle and earnings peaks have also risen significantly versus last year's roadshow.

Core views

JPMorgan's core view is that developed-market grid capex growth is likely to continue beyond 2030, driven by electrification, AI, EV adoption, manufacturing reshoring, and equipment replacement needs. Tight US supply of transmission equipment is unlikely to ease in the short to medium term. Although pricing is moderating, there appears to be limited room for material declines; accordingly, pricing and margins may remain supported for years. Recent sequential order declines at some Korean companies are more likely to reflect seasonality than a demand inflection point.

Analysis framework

The report provides qualitative analysis based on cross-regional client roadshow feedback, discussions of investor holdings and valuations, industry order and margin trends, and assessments of US and Chinese grid capex and transmission-and-distribution supply-demand dynamics.

Methodology notes

• Valuation analysisForward P/E and PEG

  Assessing post-pullback risk-reward using one-year forward P/E and PEG

  The report notes that valuations of some names have declined to around 20x one-year forward P/E or below 1x PEG, improving the appeal of buying on dips for long-term investors.

• Industry cycle analysisCapital expenditure cycle

  Cyclical assessment of grid investment demand, supply tightness, orders, and margins

  It assesses the durability of transmission-and-distribution equipment demand and mid-cycle margins through grid modernization, electricity-demand growth, capacity supply, and order trends.

• Client researchRoadshow and channel research

  Cross-regional investor feedback

  The research covers approximately 60 clients in the United States, Europe, and Asia to identify investor interest, holding changes, and core points of debate.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GE VERNOVA INC（GEV.US）

  A global peer in power equipment and transmission-and-distribution infrastructure; the report notes that it is rated Overweight by JPMorgan.

  Strengths

  Benefits from the US grid and utility capex cycle; commands high market attention among global large power-equipment companies.

  Weaknesses

  US global funds already have large-cap exposure, and willingness to add positions may be influenced by a broader global peer opportunity set.

  Comparison

  Compared with Korean and Chinese power-equipment names, GE Vernova is a large US global peer; the report believes high-voltage transmission exposure is generally more favored by investors.

  Risks

  Slower grid capex, delays in transmission projects, margin pressure from supply-demand rebalancing, and changes in the pace of data-center construction.

Key data

• Number of client discussionsApproximately 60Since late July, covering clients in the United States, Europe, and Asia.
• Example valuation for Chinese namesApproximately 20x one-year forward P/EThe report states that some quality Chinese power-equipment companies offer attractive valuations following the pullback.
• Wasion valuation and growth example10x expected 2027 P/E; approximately 20% earnings CAGRAn example of a name highlighted in the report for attention on dips.
• Share of replacement demandBelow 20%JPMorgan channel research indicates that US equipment replacement demand still accounts for a low share of total demand.
• Market price date2026-08-12 closeThe cutoff date for company prices discussed in the report.

Impact & implications

For investors, the near-term valuation pullback and market divergence provide a selective allocation window, but stock selection should favor companies with high-voltage transmission exposure, rising participation in the US market, capacity-expansion execution capability, and a path to margin improvement. Earnings and order performance from GE Vernova and other global leaders can provide external validation of recovering industry confidence.

Risks

• Power-equipment capacity expansion outpaces demand, resulting in excess supply.
• New order growth slows or margins decline from elevated levels.
• Delays in data-center and transmission project construction weaken the timing of demand realization.
• Western countries may tighten restrictions on imports of Chinese power equipment, increasing uncertainty around supply chains and the competitive landscape.
• Potential effects of greater behind-the-meter power-generation penetration on the structure of conventional transmission demand.
• Earnings may still disappoint and forecasts could be revised downward after the valuation pullback.

What to watch

• Quarterly earnings, order backlogs, and guidance changes among global power-equipment peers.
• Sequential improvements in US business revenue and margins at Hyosung Heavy and HD Hyundai Electric from the third quarter onward.
• US high-voltage transmission equipment pricing, delivery lead times, and the degree of supply tightness.
• Approval and construction progress for US grid, utility, and data-center-related capex projects.
• Margin performance of Chinese high-voltage transmission equipment companies and progress in exports to overseas emerging markets.
• The impact of potential trade restrictions and the evolution of 800VDC data-center architectures on equipment demand.