US Industrial Giants Pivot to Data Centers—Here’s Why It’s a Power Move

Old-school manufacturers are betting big on server farms—and Wall Street's already placing its over-leveraged bets.

From assembly lines to AI pipelines

Heavy metal meets cloud infrastructure as factory titans repurpose industrial real estate for hyperscale computing. Those cavernous warehouses? Perfect for server racks. Existing power grids? Ready-made for 24/7 operations.

The new industrial revolution

These aren't your grandpa's smokestacks—today's plants are minting digital gold. With manufacturing margins squeezed tighter than a Bitcoin maximalist's supply cap, data centers offer juicier returns (and fewer union headaches).

*Bonus jab:* Goldman analysts predict 'synergies' while quietly shorting the sector.

Industrial investments surge as AI boom drives data center infrastructure spending

Companies like Caterpillar, Cummis, and Johnson Controls invested in the data center market in the early days of Trump’s tariffs, a time especially filled with uncertainty and market drops. Though the market conditions are uncertain, there are no signs of a material pullback in demand for data center construction.

Chris Snyder, an analyst at Morgan Stanley, even acknowledged AI and data center market growth, “We’re seeing supersonic growth on the back of AI, and in general over the past three years, the price that you can get from the data center customer has been stronger than the price elsewhere.” 

In November 2024, Vertiv Holdings Co., a producer of cooling and power backup equipment for data centers, projected a 14% surge in its annual sales, up from the previous 11% estimate.

At the start of the year, tech giant Microsoft pledged $80 billion to increase its data center capacity. According to President Trump, the Damac Group, a Dubai-based real estate developer, will also spend $20 billion to build data centers in Texas, Arizona, Oklahoma, Louisiana, Ohio, Illinois, Michigan, and Indiana.

According to Gartner, they expect over $400 billion will be spent on data center infrastructure this fiscal year, with hyperscalers like Microsoft driving the majority—over 75%—of the projected spending.

Gates and Generac have adjusted their facilities to work on data center products

In the last few months, Gates Industrial, a huge player in the automotive industry, expanded into pipe and pump design, typically used in cooling servers in data centers. Mike Haen, the vice president of global product line management at Gates, even noted that they had to customize their equipment slightly to work on the data centre products.

Alongside Gates, Generac is betting on the hyperscale market to revive its share price, which has fallen 75% since its 2021 peak. The company has already invested around $130 million this year in facility upgrades to support large-scale generator production aimed at meeting hyperscaler demand. Ricardo Navarro, Generac’s data center chief, seemed optimistic about the company’s pivot to data centers, believing that the hyperscale market is “almost isolated” even during economic turmoil.

Earlier, Barclays Plc analyst Julian Mitchell noted that it is difficult to predict whether manufacturers in the data center industry will see a significant rise in valuation. Still, it is equally challenging to foresee a decline, given this year’s elevated spending levels. He added that, with no clear factors likely to disrupt current momentum, it’s hard to anticipate when companies might scale back their investments.

So far, the data center–driven upswing in adjacent industrial sectors has fueled robust stock performance and soaring valuations for some companies, including power corporations.

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