While tech giants like Amazon, Meta, and Microsoft dominate headlines about artificial intelligence, an unexpected group of winners has emerged from the AI boom: industrial equipment manufacturers. Caterpillar, Cummins, Generac, and Rolls-Royce are experiencing unprecedented growth by supplying power generators to the hundreds of data centers being constructed across the United States to support AI infrastructure.
These massive generators, some capable of powering over 1,000 homes, ensure that AI models and cloud software run without interruption. The financial impact has been substantial—both Caterpillar and Cummins have outperformed the S&P 500 over the past year, with their stock prices surging even higher than many of their major data center customers.
Cummins sold $2.6 billion in power-generation equipment to the data center industry last year and expects growth of 30-35% this year, according to CEO Jennifer Rumsey. For Caterpillar, the power-generation segment has grown from 8.4% of total sales in 2021 to more than 14% in the first nine months of this year. Rolls-Royce’s power-systems unit reported record revenue in February, driven partly by 46% annual growth in data center sales.
Tom Shepherd, a data center executive at Cummins, emphasized the unprecedented scale: “Power generation is a business that has never seen this kind of scale, in any way, ever.” A decade ago, he oversaw a $50 million-a-year regional business with just one large data center in his Oklahoma territory. Today, Google’s parent company Alphabet alone has more than two dozen data centers online or in development across the US, with planned capital expenditure of at least $91 billion by year’s end.
The demand extends beyond traditional backup generators. As utilities struggle to connect companies to the electric grid fast enough, hyperscalers are increasingly requesting natural gas-burning generators and turbines that can run 24/7 for months or years. Caterpillar broke ground on a $725 million expansion of its Indiana engine factory, set to more than double output by 2027. Cummins plans to invest $200 million across manufacturing sites in India, England, and the US to double production capacity of the giant 95-liter engines that drive data center generators.
According to McKinsey, $7 trillion will be spent on data centers globally by 2030, creating sustained demand for these industrial manufacturers who are positioning themselves as the picks-and-shovels providers of the AI gold rush.
Key Quotes
Power generation is a business that has never seen this kind of scale, in any way, ever.
Tom Shepherd, a data center executive at Cummins, emphasized the unprecedented nature of current demand. His perspective is particularly valuable given that a decade ago he oversaw a $50 million regional business with minimal data center presence—a stark contrast to today’s multi-billion dollar market.
The biggest limiting factor for now is the physical ability of our society to build this kind of infrastructure.
Shepherd’s observation highlights that the AI boom’s constraint isn’t just technology or capital, but the fundamental capacity to construct the massive physical infrastructure required. This suggests the generator boom will continue as society races to build out AI-supporting infrastructure.
Customers don’t just want to talk about engines and turbines—they want to talk about a complete, integrated solution to their electrical needs, including things like batteries, inverters, and control systems.
Melissa Busen, who runs Caterpillar’s electrical power division, reveals how AI infrastructure demands are pushing traditional manufacturers to evolve into comprehensive energy solution providers, expanding their market opportunity beyond simple generator sales.
Our Take
This story perfectly illustrates how AI’s impact extends far beyond Silicon Valley into traditional industrial sectors. The comparison to California Gold Rush picks-and-shovels sellers is apt—Caterpillar and Cummins are providing essential infrastructure that every AI company needs, regardless of which specific AI models or applications succeed.
What’s particularly striking is the shift from backup generators to always-on power systems, revealing that grid infrastructure is becoming a critical bottleneck for AI development. This has significant implications: either massive grid upgrades are needed, or AI growth will be constrained by available power. The $725 million factory expansion by Caterpillar, not due until 2027, suggests these companies expect sustained demand for years.
The valuation concerns raised by Morgan Stanley—with Caterpillar’s power division trading at 60-100x operating income versus Nvidia’s 25x—merit attention. However, the $39.8 billion order backlog suggests this isn’t speculative froth but real, contracted demand driving these industrial giants’ transformation into AI infrastructure kingpins.
Why This Matters
This story reveals a critical but often overlooked aspect of the AI infrastructure boom: the massive physical and electrical requirements needed to power artificial intelligence. While attention typically focuses on semiconductor manufacturers and cloud providers, the power generation bottleneck is becoming a fundamental constraint on AI development.
The unprecedented demand for generators signals that AI’s energy requirements are transforming entire industrial sectors. For manufacturing companies facing headwinds from tariffs and high interest rates, data center demand provides a crucial growth engine. The fact that these industrial stocks are outperforming major tech companies suggests investors recognize that AI infrastructure spending will continue for years, regardless of short-term AI hype cycles.
More significantly, the shift from backup generators to 24/7 natural gas-burning systems highlights a growing crisis: utilities cannot expand grid capacity fast enough to meet AI’s power demands. This has profound implications for energy policy, environmental concerns, and the feasibility of continued AI scaling. The $7 trillion projected spending through 2030 indicates this isn’t a temporary trend but a fundamental reshaping of industrial demand driven by artificial intelligence.
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Source: https://www.businessinsider.com/caterpillar-cummins-power-generators-ai-boom-winners-2025-12