Beyond the Chips: Why This Power Play Could Ride the AI Data Center Boom Higher

Artificial intelligence continues to take off, and hyperscalers are spending boatloads of money over the next several years to build out data centers that house these powerful algorithms. According to Goldman Sachs, hyperscalers such as Microsoft, Alphabet, Amazon, and Meta Platforms will spend $500 billion on capital expenditures this year.

This massive amount of spending must go somewhere, and one theme that can be intriguing for investors is investing in pick-and-shovel stocks that stand to profit from the data center buildout, which is creating robust demand for their products or services. One industrial stock to pay close attention to is Quanta Services (NYSE: PWR). Here's why.

Quanta Services benefits from the data center buildout and its demand for energy

Quanta provides infrastructure solutions for power and energy and is a key partner for utility, renewable energy, and technology companies worldwide. The company operates in two reporting segments. Its electric infrastructure solutions segment is its primary revenue generator, and it focuses on modernizing the grid, constructing substations, and high-voltage transmission. In its other segment, it provides underground utility and infrastructure solutions for gas, water, and specialty pipelines.

The rapid expansion of AI technology is driving a surge in electricity demand from data centers. According to estimates from IEA, U.S. data center electricity usage could grow by 133% by 2030. As a result, there is a pressing need to modernize the grid and ensure we have sufficient energy to power these data centers.

Image source: Getty Images.

In the past couple of years, Quanta has made several major acquisitions as it has leaned into serving more technology, data center, and semiconductor customers. The company acquired Cupertino Electric in 2024, adding a company that provides engineering, construction, and modularization services focused on the technology and data center industries.

Last year, it acquired Dynamic Systems, expanding Quanta's ability to service large load facilities such as semiconductor plants. Its efforts are paying off, as evidenced by its backlog, which hit a record $39.2 billion as of Sept. 30. This reflects surging demand across the utility, renewable energy, and technology sectors.

Quanta Services is a key player in the energy infrastructure buildout

One of the biggest risks for Quanta is a cutback in hyperscalers' spending. If AI fails to grow as projected or to pay off financially, companies may retreat from massive capital expenditures.

With that in mind, Quanta Services plays a key role in modernizing the grid and providing power solutions for companies across the technology, renewable, and utility industries. Its services are in high demand and should benefit from long-term tailwinds as hyperscalers continue to spend big on data center infrastructure in the coming years.

Courtney Carlsen has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, and Quanta Services. The Motley Fool has a disclosure policy.