A global spending spree on AI-powered data centers has pushed capital expenditure forecasts sharply higher, turning power infrastructure gear into a critical bottleneck for the tech buildout. Riding on robust industry demand, Canadian electrical equipment maker Hammond Power Solutions Inc. (TSX: HPS.A) has seen its share price soar 230.9% over the past 12 months.
Driven by the rapid adoption of artificial intelligence worldwide, major cloud service providers are ramping up investments in data center construction. Initial projections put their annual capital outlay at $650 billion, but the figure was revised upward to $725 billion following the release of first-quarter 2026 earnings results. Some estimates suggest combined spending by the world’s top five technology firms could even hit as high as $805 billion this year.
Data centers are heavy power consumers that require specialized gear for voltage regulation and power stabilization, making power equipment one of the key constraints holding back AI infrastructure expansion. Boasting a market capitalization of C$4 billion, Hammond Power Solutions designs and manufactures a full range of electrical devices, power quality systems and dry-type transformers. Its products and solutions serve a wide array of sectors, including renewable energy, general energy infrastructure and fast-growing AI data center projects.
The company delivered a stellar financial performance in the first quarter of fiscal 2026. Quarterly sales jumped 31.5% year-over-year, hitting a record high for the firm. Its order backlog also skyrocketed 94.6% from a year earlier, with newly secured orders predominantly tied to data center developments. While a swollen order backlog cannot be converted into immediate revenue, it signals strong and visible earnings growth ahead, according to industry observers.
Hammond Power managed to lift profitability despite mounting operational and cost pressures. Its gross margin expanded quarter-over-quarter from 29.2% to 30.1%. Even amid tariff-related headwinds, the company absorbed cost increases by optimizing production capacity and operational efficiency at its newly built facility in Mexico. The firm posted adjusted earnings per share of C$2.08 for the quarter, representing a nearly 30% year-over-year increase. Company executives noted that sales of standard products remained steady, while high-margin customized products tailored for the rigorous operational requirements of AI data centers have outpaced standard offerings in sales growth.
Soaring market demand has led to notable capacity shortages at the manufacturer. New projects keep growing in scale, and insufficient production capacity has become a major obstacle to winning more new business. To address the robust order inflow, Hammond Power Solutions plans to build new production facilities, though the new sites are not expected to come online for around two years.
Beyond the ongoing expansion of AI data centers, the company has multiple long-term growth catalysts. Global trends including widespread electrification, grid modernization, electric vehicle infrastructure build-out and renewable energy project rollouts will continuously fuel market demand for its products. Backed by its ample order pipeline, the power equipment firm is widely viewed to have substantial room for further growth.
