AI compute demand continues to support Europe's electrical equipment and data center capital goods chain

Overview

This report is Deutsche Bank's weekly review of Europe's capital goods and electrical equipment sectors. Its core theme is the pull from AI compute demand on data center power, cooling, fiber, grid, and related capital goods companies. The report uses Nvidia's latest earnings and Vertiv's investor day as the main threads, while also reviewing peer developments at Siemens Energy, Weir, Siemens AG, and Prysmian, and supplementing the discussion with macro data and valuation performance from Europe, the United States, and China.

Core views

The report's central view is that AI compute demand remains strong, with hyperscale cloud providers, AI-native cloud players, enterprises, and sovereign customers jointly driving data center build-out. Vertiv's higher targets for data center capacity, content value per MW, and long-term revenue growth further reinforce the positive read-through for Europe's data center chain. At the same time, the expansion pace at Fujikura and Furukawa suggests that fiber supply will not come through immediately, Siemens Energy's gas and grid businesses still offer structural support, and Weir's short-term order growth lagging peers raises execution risk.

Analysis framework

The report uses a weekly sector-tracking approach that combines company events, peer targets, investor meeting feedback, macro data, and valuation performance. Its main method is to judge the demand and supply backdrop for European electrical equipment and capital goods companies through events at Nvidia, Vertiv, Fujikura, Furukawa, Siemens Energy, and Weir, while supplementing the macro and market backdrop with PMIs, IFO, PPI, industrial production, housing starts, and valuation multiples.

Methodology notes

• Industry read-throughPeer-event read-through analysis

  Use key peer earnings, investor days, and medium-term targets to assess changes in demand and supply across the industry chain.

  The report maps Nvidia and Vertiv's strong data center demand onto European electrical equipment companies, and maps the targets and expansion pace of Japanese fiber peers onto fiber-related companies such as Prysmian.

• Market valuationRelative valuation and weekly performance tracking

  Use P/E, EV/EBITA, and share-price performance to assess sector valuation and market sentiment.

  The report notes that the sector fell 2.0% on the week, underperforming the STOXX Europe 600 by about 2.7 percentage points, and provides the 2026E P/E and EV/EBITA medians.

• Macro trackingManufacturing and industrial activity indicator tracking

  Use PMIs, IFO, PPI, industrial production, housing starts, and similar indicators to evaluate the capital goods demand environment.

  The report tracks manufacturing and industrial activity data from the eurozone, Germany, France, the United States, and China to judge short-cycle industrial demand and macro pressure.

Asset mapping & comparison

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

• Schneider Electric

  European data center electrical equipment beneficiary

  Strengths

  Benefits from growth in data center power management, distribution, and energy-efficiency demand.

  Weaknesses

  Valuation may already reflect part of the structural growth outlook.

  Comparison

  The report lists it as one of the positive European read-through names from Vertiv's stronger data center demand.

  Risks

  Slower data center build-out, capex-cycle volatility, and weaker macro manufacturing conditions.

• Siemens Energy

  Grid and gas equipment beneficiary

  Strengths

  The report argues that market concerns about gas GW orders peaking overlook the FY30+ increase in after-sales revenue and structural growth in the Grid business.

  Weaknesses

  Gas order cycles and execution pace may still worry the market.

  Comparison

  Compared with short-cycle industrial companies, the grid business has stronger structural support.

  Risks

  Concerns about order peaks, project execution, and margin delivery falling short of expectations.

• ABB

  Positive European data center and electrical equipment read-through

  Strengths

  Exposure to electrification, automation, and data center-related demand.

  Weaknesses

  A relatively high valuation may limit near-term upside.

  Comparison

  ABB sits in the higher-valuation portion of the large-cap capital goods valuation chart.

  Risks

  Multiple compression, weaker industrial demand, and slower order growth.

• Legrand

  Data center electrical infrastructure beneficiary

  Strengths

  Linked to demand for data center power distribution and infrastructure.

  Weaknesses

  Its growth leverage may be lower than that of more direct data center equipment suppliers.

  Comparison

  It is listed alongside Schneider, ABB, and Siemens AG as a positive read-through company.

  Risks

  Slower data center capex and a weaker European macro backdrop.

• Prysmian

  Fiber, cable, and data center connectivity beneficiary

  Strengths

  AI and data center build-out are boosting demand for fiber optics, cables, and power connections.

  Weaknesses

  Targets and capacity-expansion pace at Japanese peers show uncertainty around fiber pricing and supply release.

  Comparison

  The medium-term targets at Fujikura and Furukawa provide peer benchmarks for Prysmian.

  Risks

  Fiber pricing sustainability, the pace of capacity expansion, and peer competition.

• Weir

  Mining capital goods company

  Strengths

  Structural mining growth remains intact, supported by key hard-rock commodity prices; management's cost cuts and software asset execution have been strong.

  Weaknesses

  Recent order growth has lagged peers, H1 faces a tougher year-on-year base, and Q2 execution has become more important.

  Comparison

  The report sees its short-term growth as weaker than some peers, but notes that the share price has already reflected part of that.

  Risks

  Order recovery falling short, FY26 revenue and profit skewed more to H2, and volatility in mining capex.

Key data

• Nvidia FQ1 revenueUSD 82 billion, +85% YoYAbout 3% above consensus, which the report views as a sign that the AI compute opportunity remains healthy.
• Nvidia FQ2 revenue midpoint guidanceUSD 91 billion, nearly 2x YoYAbout 5% above consensus.
• Vertiv data center TAMAbout USD 50 billion, with 2025-2030 CAGR of around 18-20%Cloud and colocation subsegments are about USD 29.5 billion and are expected to grow at roughly 23-25% CAGR.
• Vertiv expected new data center capacity140GW over the next five yearsThe prior expectation was 100GW, or about 20-35GW of annual additions, constrained by power, permitting, and labor.
• Vertiv content opportunity per MWUSD 3.25-3.75 million per MWUp about 10-15% versus the prior range.
• Vertiv 2025-2030 organic revenue CAGR target20-22%The prior 2024-2029 target was 12-14%.
• Vertiv 2030 margin target27%Above the prior 2029 target of 25% and the 2026 guidance of about 23.3%.
• European capital goods sector weekly performance-2.0%, or -2.7 percentage points versus STOXX Europe 600As of the report week.
• Sector valuation2026E P/E median of 21.9x, EV/EBITA median of 15.8xThe report recommends referring to the related thematic report for detailed valuation and risk analysis.
• Eurozone May manufacturing PMI flash51.4Below the consensus expectation of 51.8; April was 52.2.
• Germany May manufacturing PMI flash49.9Below the consensus expectation of 51.0; April was 51.4.
• China April industrial production+4.1% YoYBelow the consensus expectation of +6.0%; March was +5.7%.

Impact & implications

For investors, the report reinforces that AI compute infrastructure remains one of the clearest structural themes in European capital goods. Beneficiaries include power and cooling, distribution, grid, cables, fiber optics, and data center-related equipment. Companies such as Schneider, Siemens Energy, ABB, Legrand, Siemens AG, and Prysmian with data center exposure may continue to receive demand and valuation support. However, weakening manufacturing data, softer order cadence at some companies, and uncertainty around fiber expansion and pricing sustainability mean short-term share-price performance could diverge.

Risks

• Weakening manufacturing PMIs in Europe and globally could weigh on short-cycle industrial demand.
• Data center construction is constrained by power supply, permitting, and labor, so new capacity may come in below expectations.
• If AI-related capex slows, demand expectations for power, cooling, fiber, and cables could be revised down.
• Fiber pricing sustainability and the pace of capacity expansion remain uncertain.
• High-valuation capital goods companies may face multiple compression if earnings delivery disappoints.
• Companies such as Weir with short-term order growth lagging peers face higher execution risk.

What to watch

• Nvidia's subsequent revenue guidance and commentary on AI compute demand.
• Vertiv's data center orders, margins, and content value per MW delivery.
• Data center-related orders at Schneider, Siemens Energy, ABB, Legrand, Siemens AG, and Prysmian.
• Capacity plans and pricing trends at Fujikura, Furukawa, and other fiber peers.
• Eurozone, German, and French manufacturing PMIs and other leading indicators such as IFO.
• US housing starts, building permits, and inventory data.
• China industrial profits, industrial production, and the recovery in automation demand.
• Weir's Q2 orders and seasonal revenue/profit delivery.