AI compute demand continues to support Europe’s capital goods data center chain

Overview

This report is Deutsche Bank Research’s weekly report on the European capital goods and electrical equipment industry, titled “Compute is all you need.” The core information comes from Nvidia earnings, Vertiv’s investor day, observations from the European capital goods first-quarter reporting season, Siemens Energy roadshows, Weir’s investor meeting, and macro data. Overall, the report emphasizes that AI compute and data center construction remain the strongest structural theme in the capital goods industry, but short-term sector performance and macro data are not fully synchronized, so investors still need to differentiate among beneficiary chains, valuations, and execution timing.

Core views

The report’s most important view is that AI compute demand remains healthy, and companies related to data center power, cooling, grid, connectivity, and cables have positive read-across. Vertiv raised its targets for data center capacity, TAM, content value per MW, revenue CAGR, and long-term margin, supporting the demand thesis for related European companies such as Schneider, Siemens Energy, ABB, Legrand, Siemens AG, and Prysmian. On the other hand, Fujikura and Furukawa’s fiber targets and expansion pace show that there is still uncertainty around the sustainability of fiber capacity and pricing; Weir’s structural mining drivers remain intact, but its recent order growth lags peers; Siemens AG is still seen as fairly fully valued amid the deconsolidation of Healthineers, portfolio simplification, and an automation recovery.

Analysis framework

The report uses a weekly industry-tracking framework, treating the latest operating data from large technology companies and equipment vendors as demand-side signals, then assessing the potential impact on European capital goods companies through peer mapping; it also combines company roadshows, first-quarter earnings reviews, sector valuation and share-price performance, macro PMI, and industrial data to form an integrated judgment on industry conditions, stock catalysts, and risks.

Methodology notes

• Industry condition trackingAI compute read-across

  Infer the health of the data center capital expenditure chain from Nvidia and Vertiv’s operating data

  The report uses Nvidia’s revenue growth and guidance, along with Vertiv’s data center TAM and capacity forecasts, as external demand validation for European electrical equipment and data center equipment companies.

• Relative valuationP/E and EV/EBITA sector comparison

  Use 2026E P/E and EV/EBITA to measure the valuation level of the European capital goods sector

  The report discloses median sector 2026E P/E of 21.9x and EV/EBITA of 15.8x, and combines these with weekly share-price performance to assess market pricing.

• Macro cross-checkPMI, IFO, PPI, and industrial production tracking

  Use manufacturing and industrial activity data to test the demand environment

  The report tracks manufacturing, real estate, and industrial data from the Eurozone, Germany, France, the United States, and China to assess the macro backdrop for capital goods orders and revenue growth.

Asset mapping & comparison

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

• European data center-related companies such as Schneider, Siemens Energy, ABB, Legrand, Siemens AG, and Prysmian

  Benefit from the positive read-across of Vertiv’s upward revisions to data center power and cooling equipment TAM, capacity, and content value per MW

  Strengths

  Strong demand from AI compute, cloud, and colocation data centers, with structural growth in power, cooling, grid, and cable equipment.

  Weaknesses

  Valuation and the pace of order conversion may be short-term constraints.

  Comparison

  Compared with short-cycle industrial businesses, data center and power-related businesses performed more strongly in the first-quarter reporting season.

  Risks

  Data center construction is affected by power availability, permitting approvals, labor, and capital expenditure cycles.

• Vertiv

  As a U.S. peer in data center power and cooling equipment, it provides a demand readout for European equipment companies

  Strengths

  TAM, capacity, content value per MW, revenue CAGR, and long-term margin targets were all revised upward.

  Weaknesses

  The report does not provide a detailed valuation view on Vertiv itself.

  Comparison

  Its investor day information is used as external validation of the demand environment for European companies.

  Risks

  If AI capex or data center construction slows, the positive read-across may weaken.

• The fiber and cable chain related to Prysmian, Fujikura, and Furukawa

  Fiber supply, U.S. domestic capacity, and pricing expectations affect investors’ view of the connectivity segment

  Strengths

  Data center and optical communications demand still support medium- to long-term growth.

  Weaknesses

  Fujikura’s FY28 profit target is below consensus expectations; Furukawa is cautious on short-term price sustainability.

  Comparison

  Compared with data center power and cooling equipment, confidence in capacity rollout and pricing in the fiber chain is more uncertain.

  Risks

  The U.S. bare-fiber capacity gap, slow expansion pace, price declines, and internal capacity reallocation may affect profitability.

• Siemens Energy

  Company roadshow feedback suggests the market’s concern that Gas GW orders have peaked may overlook aftermarket revenue and grid business growth

  Strengths

  Aftermarket revenue is expected to rise after FY30, the Grid business has structural growth, and the end of the trademark agreement may contribute about 1 percentage point of margin from 2031.

  Weaknesses

  Investors remain concerned about the peak in gas power generation orders.

  Comparison

  Compared with pure gas orders, the report places more emphasis on the long-term structural value of the grid and aftermarket revenue.

  Risks

  There is uncertainty around the order cycle, project execution, margin delivery, and capital return plans.

• Weir

  A mining equipment stock; the report maintains BUY but lowers the target price

  Strengths

  Commodity prices related to hard rock mining support structural growth, and the company is executing well on cost reduction and software assets.

  Weaknesses

  Recent order growth lags peers, H1 faces a high base, and FY26 revenue and profit are more back-end loaded to H2.

  Comparison

  Compared with peers, Weir’s recent order growth is weaker, though the market may have partly priced in the short-term pressure.

  Risks

  Q2 execution, order recovery, mining capex, and profit seasonality are key risks.

Key data

• Nvidia FQ1 revenue$82 billion, +85% year over year3% above consensus, used to verify that AI compute demand remains strong.
• Nvidia FQ2 revenue guidanceAbout $91 billionThe midpoint implies revenue nearly doubling year over year and is 5% above consensus.
• Vertiv data center power and cooling equipment TAMNearly $50 billion, 18-20% CAGR through 2030The cloud and colocation data center portion is expected to grow at a 23-25% CAGR.
• New data center capacity over the next 5 years140GWVertiv raised its previous 100GW forecast and expects 20-35GW of annual additions, with constraints coming from power, permitting, and labor.
• Data center content value per unit$3.25 million-$3.75 million per MWUp 10-15% from the previous range.
• Vertiv long-term target2025-2030 organic revenue CAGR of 20-22%, 2030 margin of 27%Raised from the previous 2024-2029 CAGR target of 12-14% and 2029 margin target of 25%.
• Weekly performance of the European capital goods sectorDown 2.0%, underperforming the STOXX Europe 600 by 2.7 percentage pointsAs of the week of the report.
• European capital goods valuation2026E P/E 21.9x, EV/EBITA 15.8xSector median.
• Fujikura FY28 operating profit targetJPY 315 billionBelow the JPY 455 billion consensus expectation, triggering a 17% single-day share-price decline.
• Eurozone May manufacturing PMI51.4Below the 51.8 consensus expectation and below April’s 52.2.
• Germany and France May manufacturing PMIGermany 49.9, France 48.9Both were below consensus expectations, indicating weak European manufacturing data.
• China April industrial production+4.1% year over yearBelow the +6.0% consensus expectation and March’s +5.7%.
• Weir target price3230p13% lower than the previous target price, though the report says BUY is maintained.

Impact & implications

In terms of investment implications, the report reinforces the medium- to long-term growth logic for the data center power, cooling, grid, connectivity, and cable chain, especially benefiting European capital goods companies with data center exposure. However, the market is already beginning to differentiate across different segments: Vertiv’s upward revisions are positive, Fujikura and Furukawa’s comments on capacity expansion and pricing are more cautious, Weir needs to prove that orders and profits will accelerate in the second half, and Siemens AG faces the issue of already being fairly fully valued. On the macro side, slower European manufacturing PMI and China industrial data suggest that short-cycle industrial demand may still weigh on sector performance.

Risks

• AI capex or the pace of data center construction may come in below expectations.
• Power availability, permitting approvals, and labor shortages may limit new data center capacity.
• European manufacturing PMI may weaken, and improvement in short-cycle industrial demand may fall short of expectations.
• The fiber and cable chain faces risks around price sustainability, capacity rollout, and insufficient U.S. domestic capacity.
• Weir’s order growth lags peers, and FY26 profit is more dependent on delivery in the second half.
• Inflation, interest rates, foreign exchange, and geopolitical shocks may affect capital goods valuations and orders.
• A slowdown in China’s industrial production may weaken expectations for global industrial demand.

What to watch

• Capital expenditure and revenue guidance from Nvidia, cloud vendors, and AI-native cloud service providers.
• Vertiv’s follow-up on orders, capacity, content value per MW, and margin delivery.
• Data center-related order disclosures from Schneider, Siemens Energy, ABB, Legrand, Siemens AG, and Prysmian.
• Siemens Energy’s November capital return, FY30 margin guidance, and Grid business growth.
• U.S. expansion, pricing, and FY28 target updates from Fujikura, Furukawa, and other fiber manufacturers.
• Whether Weir’s Q2 orders, revenue, and profit seasonality improve as expected.
• Manufacturing PMI, PPI, industrial production, and building permit data in the Eurozone, Germany, France, the United States, and China.
• P/E, EV/EBITA, and relative performance versus the STOXX Europe 600 for the European capital goods sector.