According to UBS, the data center sector is expected to experience rapid growth over the next few years. The investment bank predicts 15% to 20% growth from 2024 to 2025, followed by “healthy” double-digit growth in the years after. This is based in part on projected growth for hyperscalers, which are doing much of the cloud computing for artificial intelligence applications. Data centers house the vast amount of computing power needed for AI workloads, and that need will continue to grow as many technology companies rapidly develop infrastructure for artificial intelligence. Probably. Large language models require large amounts of data center capacity. “At this stage, the entire data center value chain appears to be experiencing generally healthy growth for capital goods companies,” UBS analysts wrote in an April 5 note. Large-scale electrification and an increase in safe power facilities are expected as electricity usage increases. “The sector is constrained by supply rather than demand, faces rapid growth prospects in the short term, and has the potential for structural growth driven by data creation (IoT). [machine learning] and [generative] It takes into account not only data sovereignty but also AI,” the analysts said. The bank cited three stocks that are leading this trend: U.S.-listed power management company Eaton, French energy technology company Schneider Electric, and U.S. power technology company Cummins. Eaton is said to hold the key. U.S. gives 14% exposure to data centers and “broadly favorable trends” in electrification, while Cummins gives data centers “favorable backup power exposure” and UBS gives Eaton a price target. It gave a price of $330, indicating a slight downside. His Schneider, whose target is $321, or a potential upside of 9.7%, is the “most direct European effort” in this growth theme, with data centers and networking accounting for 19% of sales. and benefit from the entire value chain, from electrification to building management and cooling. UBS gave the stock a price target of 250 euros ($270), or about 20% potential upside. — CNBC’s Michael Bloom contributed to this report.