Hyperscalers Are Projected to Spend $1.3 Trillion on Capex in 2027. Here's the 1 Industrial Stock That Gets Paid Before a Single AI Token Is Sold.
Eaton gets paid before AI generates a dime.
In 2027, the world's six leading hyperscalers anticipate capital expenditures exceeding $1.3 trillion. This projection marks a significant increase from $870 billion in 2026 and $470 billion in 2025. While these tech behemoths are pouring resources into artificial intelligence infrastructure, one industrial company, Eaton (ETN -1.11%), stands to gain even before AI systems start generating revenue.
Eaton manufactures electrical equipment essential for operating data centers, with AI data centers demanding massive electricity consumption. With accelerating AI infrastructure spending, Eaton's business is experiencing substantial growth, as its equipment is crucial for powering and managing these centers. Eaton supplies switchgear, circuit breakers, power distribution systems, and backup power equipment, which are non-negotiable purchases for data centers.
Moreover, as customers upgrade existing facilities to support more powerful AI servers, they require additional electricity, further benefiting Eaton's sales. Unlike hyperscalers, Eaton does not need to rely on AI subscriptions, advertising, or cloud services to justify its spending. Instead, the company generates revenue by selling the equipment necessary for building the infrastructure.
Eaton's Q3 2026 results exemplify this growth. Revenue reached $8.9 billion, a 28% year-over-year increase, with 19% organic growth. Its Electrical Americas segment alone generated $4.2 billion in revenue, reflecting 22% organic growth, and achieved an operating profit of $1.2 billion with a 29.8% operating margin. The segment's rolling 12-month average organic orders surged 39%, and its backlog grew 33% compared to the prior year.
Eaton's Electrical Global business also reported strong performance, with revenue increasing 58% to $2.7 billion, driven by acquisitions and organic growth. Overall, Eaton's free cash flow reached $1.03 billion for the quarter. While there are risks associated with this strategy, such as hyperscalers potentially reducing future capital expenditures if AI infrastructure does not yield sufficient returns, Eaton's diversified customer base in utilities, aerospace, industrial facilities, and commercial buildings lessens its exposure to AI-specific risks.
Nonetheless, Eaton's strategic position in the AI infrastructure market makes it an attractive investment option, especially for those seeking to capitalize on AI infrastructure spending without relying solely on the eventual profitability of AI services.
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