US Industrial Firms Venture into Data Center Market for 14% Sales Surge

US industrial companies are increasingly venturing into the data center market, driven by the growing demand for equipment such as cooling systems and backup power. This shift is part of a broader strategy to capitalize on the hundreds of billions of dollars being invested in the data center industry. Firms like Gates Industrial and Generac are already expanding their sale of specialist equipment, offering backup power generators and cooling pumps for tech giants like Amazon, Alphabet, Meta, and Microsoft.

North Carolina’s Honeywell, a well-known manufacturer of aerospace and automotive products, as well as residential, commercial, and industrial control systems, also targets the data center market with its hybrid cooling solutions. During the firm’s last earnings call, the company’s CEO, Vimal Kapur, said that the firm will prioritize data centers, given that the market is growing despite current market conditions.

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.

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.

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.

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.

The data center industry has a substantial economic impact, directly employing over 600,000 workers and supporting a total of 4.7 million jobs in the US. This growth is fueled by the increasing demand for data processing capabilities.

The trend of industrial companies moving into the data center market is also driven by the rapid expansion of data centers, which has become a significant source of confidence for private equity investors. This confidence is bolstered by the industry's commitment to sustainability and clean energy. For instance, Digital Realty, a leading data center provider, has matched 185 facilities with 100% renewable energy, showcasing its industry-leading sustainability performance.

The data center market is also seeing strategic acquisitions and partnerships. DigitalBridge Group and La Caisse completed the acquisition of Yondr Group, a hyperscale data center developer and operator, to address growing capacity requirements from technology companies. This acquisition positions both investors to capitalize on the increasing demand for advanced data processing capabilities.

The data center industry is not only expanding but also evolving to meet the needs of advanced technologies like AI. OpenAI, for example, is set to rent an additional 4.5 gigawatts of data center power capacity from Oracle in a $30 billion deal. This move is part of a larger $500 billion AI infrastructure project aimed at building large-scale data centers across the US to support the development of advanced AI models.

In summary, US industrial companies are moving into the data center market to supply essential equipment and capitalize on the industry's growth. This trend is driven by the increasing demand for data processing capabilities, the industry's commitment to sustainability, and strategic acquisitions and partnerships. The data center market is not only expanding but also evolving to meet the needs of advanced technologies, making it a key area of investment and innovation.