Data center construction bottlenecks deepen, while power equipment and modular supply chains continue to benefit

Overview

This report is Bernstein's thematic follow-up on the global electrical infrastructure and data center construction chain, with core information drawn from discussions with the procurement head of a leading data center developer. The report focuses on three main themes: rising resistance to data center construction, still-tight supply-demand and lead times for power generation equipment, and Chinese electrical equipment manufacturing capacity entering the U.S. market through offshore partnerships.

Core views

The core view of the report is that data center demand remains strong, but execution difficulty has increased significantly. Public resentment over electricity prices, water resources, and employment impacts has led to more project delays or cancellations, so developers are advancing projects in parallel across multiple geographies to offset risk. Power remains a key bottleneck, but shortages of skilled labor such as high-voltage electricians, commissioning specialists, electrical/utility engineers, and substation construction crews are worsening. As rack density increases, construction methods will become more modular, and demand for integrated data center solutions will grow. On power generation equipment, lead times for gas turbines, large reciprocating engines, and diesel backup gensets remain long, but price increases have started to moderate.

Analysis framework

The report uses expert interviews and supply-chain pulse checks, combining the procurement perspective of data center developers with Bernstein's coverage ratings on OEMs, MEP contractors, and European capital goods companies to assess the impact of project advancement probabilities, equipment lead times, contract terms, pricing trends, and supply chain changes on listed companies.

Methodology notes

• Supply-chain expert interviewsData center construction pulse check

  Assess project execution, supply constraints, and the competitive landscape through feedback from front-line procurement leaders.

  The expert previously worked at one of the top five electrical contractors in the U.S. and currently works at a leading data center developer. Based on this, the report distills three main observations: obstacles to data center construction, lead times for power generation equipment, and Chinese manufacturing entering the U.S. market.

• Supply-demand analysisPower generation equipment lead time and pricing tracking

  Use equipment lead times, deposit ratios, gray-market premiums, and capacity expansion to judge the degree of supply-demand tightness.

  Lead times for gas turbines and large reciprocating engines extending to 2029-2030 or beyond indicate supply remains tight; however, slowing price increases show that new capacity and equipment released from delayed projects are beginning to ease some pressure.

• Investment mappingBeneficiary companies and bottleneck asset mapping

  Map data center modularization, power redundancy, and electrical equipment supply bottlenecks to listed companies.

  The report links Eaton, Hubbell, Legence, Quanta Services, Fidelity Power Systems, and others to modular construction and electrical equipment supply, while also listing ratings and target prices for power generation equipment companies such as Caterpillar and Cummins.

Asset mapping & comparison

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

• Eaton

  Beneficiary of electrical equipment and modular data center construction; rated Outperform in the report with a target price of $534.

  Strengths

  Has electrical equipment capabilities and already holds stakes in Chinese transformer manufacturers, helping expand supply chain capacity.

  Weaknesses

  Data center project delays or cancellations may affect the pace of order conversion.

  Comparison

  Compared with pure power generation equipment suppliers, Eaton is more directly exposed to demand for electrical infrastructure and modular equipment.

  Risks

  Public opposition, insufficient project financing or permitting, cross-border supply chain compliance, and slowing pricing growth.

• Hubbell

  Beneficiary of the electrical equipment and modular construction chain; rated Outperform in the report with a target price of $584.

  Strengths

  The report lists it as a company that could benefit from expanding internal prefabrication capabilities or growing demand for modular equipment.

  Weaknesses

  Affected by project start timing and labor bottlenecks.

  Comparison

  Like Eaton, it belongs to the electrical equipment beneficiary chain, but the specific benefit depends on product mix and project delivery capability.

  Risks

  Data center project delays, slowing equipment price growth, and intensifying competition.

• Legence

  Beneficiary of MEP contracting and modular construction; rated Outperform in the report with a target price of $103.

  Strengths

  Its MEP contracting capabilities fit the trend toward more modular and prefabricated data center construction.

  Weaknesses

  Sensitive to construction labor, commissioning personnel, and project execution cycles.

  Comparison

  Compared with equipment OEMs, Legence is more focused on engineering delivery and construction organization capability.

  Risks

  Labor shortages, project cancellations, and customers delaying capital expenditures.

• Quanta Services

  Participant in the power infrastructure and construction chain; rated Market-Perform in the report with a target price of $725.

  Strengths

  Benefits from increased demand for grid, substation, and high-voltage construction.

  Weaknesses

  The report also points out that shortages of substation construction crews and electrical/utility engineers are worsening.

  Comparison

  Compared with equipment manufacturers, Quanta Services is more constrained by labor availability and construction scheduling.

  Risks

  Insufficient skilled labor, permitting delays, and rising execution complexity due to geographic dispersion of projects.

• Caterpillar

  Power generation equipment-related company; rated Market-Perform in the report with a target price of $1,002.

  Strengths

  Data center backup and behind-the-meter power demand supports equipment orders.

  Weaknesses

  Price growth is slowing from previous highs, and project quality screening is becoming stricter.

  Comparison

  Like Cummins, it benefits from power redundancy demand, but as large data center scale increases, the expert prefers gas turbines.

  Risks

  Cancelled or delayed projects releasing equipment, higher deposit requirements affecting customer ordering, and changes in gray-market supply.

• Cummins

  Power generation equipment-related company; rated Market-Perform in the report with a target price of $700.

  Strengths

  Reciprocating engines remain attractive in the 20-80 MW range or when power needs to be secured quickly.

  Weaknesses

  Lead times for large reciprocating engines are long, extending to 2029-2030, and price growth is slowing.

  Comparison

  Compared with gas turbines, reciprocating engines have more advantages in time-priority and mid-scale data center scenarios.

  Risks

  Uncertain equipment delivery, competitors expanding capacity, and equipment released from delayed projects depressing pricing elasticity.

• Siemens

  European capital goods and electrical equipment supplier; rated Outperform in the report with a target price of €300.

  Strengths

  The report says Siemens is bringing China-manufactured transformers into the U.S. market, increasing supply capacity.

  Weaknesses

  Cross-border manufacturing chains may face customer scrutiny, policy, and trade risks.

  Comparison

  Compared with suppliers relying only on domestic capacity, Siemens can alleviate supply bottlenecks through Chinese manufacturing capacity.

  Risks

  Geopolitical, tariff, supply chain transparency, and project acceptance risks.

• Schneider Electric

  European electrical equipment and data center infrastructure beneficiary; rated Outperform in the report with a target price of €310.

  Strengths

  Rising demand for electrical infrastructure and data center construction supports long-term opportunities.

  Weaknesses

  The report discloses investment banking and non-investment banking business relationships involving Bernstein and affiliates, so potential conflict-of-interest disclosures should be noted.

  Comparison

  Belongs to the same basket of European electrical equipment beneficiaries as Siemens and Legrand.

  Risks

  Project delays, slowing price growth, and intensifying supply chain competition.

• Legrand

  European electrical equipment supplier; rated Outperform in the report with a target price of €170.

  Strengths

  Benefits from data centers and electrical infrastructure upgrades.

  Weaknesses

  Affected by industry order conversion and construction pace.

  Comparison

  Along with Schneider and Siemens, it is listed as an Outperform-rated European capital goods company.

  Risks

  Project cancellations, intensifying competition, and demand shifting from price-driven to delivery-capability-driven.

• Prysmian

  Cable and electrical infrastructure-related company; rated Outperform in the report with a target price of €110.

  Strengths

  Expansion of power infrastructure and demand for electrical connections in data centers provide support.

  Weaknesses

  The report discloses related holdings and service relationships, which should be interpreted cautiously in conjunction with compliance disclosures.

  Comparison

  Compared with equipment OEMs, Prysmian is more focused on the electrical connection and infrastructure materials chain.

  Risks

  Project delays, raw material and supply chain volatility, and risks related to conflict-of-interest disclosures.

Key data

• Share of data center projects progressing as planned60%-65%Experts expect about 60%-65% of projects in the pipeline to move forward as planned.
• Behind-the-meter power redundancy demand1.3-1.5x IT loadThe expert estimates behind-the-meter power redundancy is higher than the 1.0x assumed in Bernstein's model.
• Backup diesel generation redundancy demand1.0x IT loadThe expert estimates it is higher than the 0.8x assumed in Bernstein's model.
• Gas turbine lead timeto 2030The expert prefers gas turbines more as large data center scale increases.
• Large reciprocating engine lead time2029-2030Applicable to 10-20 MW large reciprocating engines.
• Tier 4 diesel backup genset lead timeabout 2 yearsStill at a relatively long delivery cycle.
• Tier 2 diesel backup genset lead time12-18 monthsShorter than Tier 4 diesel backup gensets.
• Sub-2MW diesel backup genset lead timeless than 1 yearRelatively easier to obtain.
• OEM deposit requirement20%Higher than the traditional deposit requirement of about 10%.
• Previous price increase+30%-50%The expert said current price growth has shifted to moderate inflation.

Impact & implications

From an investment perspective, data center construction has moved from a phase driven purely by demand expansion to one dominated by execution bottlenecks. Power access, labor, equipment lead times, and permitting/financing conditions will determine the real pace of deployment. For investors, opportunities are more concentrated in companies that can help customers shorten construction cycles, increase modularization, secure supply of critical equipment, and optimize power redundancy solutions; however, slowing price increases for power generation equipment mean earnings elasticity may shift from price-driven to delivery capability, capacity allocation, and project quality selection.

Risks

• Increasing delays or cancellations of data center projects may cause equipment order conversion to lag expectations.
• Public resentment over higher electricity prices, water usage, and employment impacts may increase permitting and project execution difficulty.
• Shortages of high-voltage electricians, commissioning specialists, electrical/utility engineers, and substation construction crews may further slow construction.
• Shortages of immigrant labor will amplify construction bottlenecks; the report states immigrants typically account for about one-third of total labor.
• Slowing price growth for power generation equipment may weaken the earnings elasticity previously driven by strong price increases.
• Equipment released from delayed or cancelled projects, new competitors entering, and capacity expansion may improve supply and suppress prices.
• Chinese manufacturing capacity entering the U.S. market through offshore partnerships may bring trade, policy, and customer acceptance risks.
• The report covers many companies and contains extensive conflict-of-interest disclosures, so the investment conclusions should be further verified alongside company-specific disclosures and valuation methods.

What to watch

• Whether the actual start rate of data center projects remains at the 60%-65% level expected by the expert.
• Whether lead times for gas turbines, large reciprocating engines, and diesel backup gensets continue to extend or start to shorten.
• Whether OEM deposit ratios, repurchase terms, and project feasibility review standards continue to tighten.
• Whether penetration of integrated and modular data center construction solutions accelerates as rack density rises.
• Whether equipment released from delayed or cancelled projects turns from rumor into actual supply.
• The scale, customer acceptance, and policy constraints of China-manufactured transformers, high-voltage circuit breakers, and other equipment entering the U.S. market.
• The expansion of prefabrication capacity and order quality at companies such as Eaton, Hubbell, Legence, and Quanta Services.
• Whether data center power costs, water resource disputes, and local employment impacts trigger more project resistance.