Cummins' Surprising Growth Driver: AI-Powered Data Centers

Cummins Inc.'s Q2 earnings beat expectations, with shares up 12% in August. The company's growth driver is surprisingly artificial intelligence (AI), as it becomes a supplier of power systems for data center buildout. However, the core business is still exposed to cyclical risks and global tariffs. Investors must consider the company's shift to energy-infrastructure provider for the digital economy, as well as the tariff risk.

Cummins Inc. (NYSE: CMI) shares surged nearly 12% in August following the company's second-quarter earnings report. The company delivered a strong performance, beating both top-line and bottom-line expectations. This positive performance comes as Cummins transitions from its traditional diesel and natural gas engine business to a significant role in the burgeoning AI infrastructure market.

The main driver of Cummins' growth is artificial intelligence (AI). The company is increasingly supplying power systems essential for the rapid buildout of data centers. This shift is evident in the company's Q2 earnings call, where CEO Jennifer Rumsey highlighted the "strong momentum in data center demand" as a tailwind for the business.

While the AI infrastructure market is in the early stages of a multi-year growth trend, Cummins' core business remains exposed to cyclical risks and global tariffs. The company acknowledged that new tariffs will add "tens of millions" of dollars in annual costs, but characterized these as "immaterial" to its full-year guidance, pointing to its global scale and supply chain diversification.

From a technical perspective, Cummins stock has rallied sharply in August, forming a golden cross pattern immediately after the earnings report. However, the shares are trading around $401, well above the 50-day simple moving average near $360, and the Relative Strength Index (RSI) is hovering around 65, close to the overbought threshold of 70. This suggests that the stock may be running ahead of itself and could pull back toward the $295–$300 zone.

Despite these near-term concerns, long-term investors should consider Cummins' exposure to data centers as a structural catalyst. However, it is too early to call this a proper pivot. The company remains deeply tied to cyclical industrial markets and faces uncertainty from tariffs and global demand trends.

Investors should weigh the near-term risk of a pullback against the possibility that Cummins evolves into a must-own infrastructure name for the AI economy. The stock deserves fresh attention for reasons few would have predicted a few years ago.

References:
[1] https://www.nasdaq.com/articles/engines-ai-cummins-surprising-growth-driver
[2] https://www.marketbeat.com/instant-alerts/filing-parnassus-investments-llc-has-11001-million-position-in-cummins-inc-cmi-2025-08-29/