## Why Did Power Stocks Suddenly Explode? The AI Wave Is Reshaping the New Power Grid Landscape

Power stocks used to be the "dull donkey" in investments—stable surplus but lacking explosive growth. But the situation has completely reversed in the past two years. Companies like Huasheng have seen gains of over 1600% since 2023, and Zhongxing Electric, Shidian, and Yali have also become market focal points. What's the driving force behind this? One word—AI.

As ChatGPT, Midjourney, and other AI tools are used by hundreds of millions daily, the data centers behind them must operate 24/7 with roaring activity. Training a large model like GPT-4 consumes electricity equivalent to several thousand households' annual usage. Tech giants such as Microsoft, Google, Meta, Amazon, and TSMC are all ramping up investments in AI data centers.

According to the International Energy Agency, by 2030, global data center electricity consumption will double to 945 TWh—already surpassing Japan's entire electricity usage. The electricity demand for AI-specific data centers is expected to grow more than fourfold. In other words, AI is creating an unprecedented electricity shortage.

## Power Grid Upgrades, Energy Storage, Green Energy—An Industry Gold Mine Awakened

What does this huge electricity demand mean? New power plants need to be built, the grid must be upgraded, substations and transformer stations expanded—all requiring大量的 transformers, GIS switches, distribution panels, and other core equipment.

Taiwan's government’s "Resilient Power Grid Plan" is expected to allocate NT$500 billion, and the U.S. Inflation Reduction Act is also pouring in massive subsidies for grid modernization. The global energy transition trend is unstoppable—each wind and solar farm needs supporting transmission and distribution equipment. Energy storage systems are also accelerating—these are core businesses for heavy electrical equipment companies.

Simply put, **heavy electrical concept stocks are those listed companies manufacturing and contracting power equipment and projects**. They are the most benefited links in the power industry chain—electricity consumption ↑ → grid pressure ↑ → equipment demand ↑ → order backlog.

## Taiwan’s Four Heavy Electrical Giants: Who Is Riding This Wave of Benefits?

**Huasheng (1519)** is a leader in transformer technology, with the only production line in Taiwan capable of manufacturing 500kV ultra-high voltage transformers. The key is that ultra-high voltage equipment has extremely high technical barriers, long certification periods, and is difficult for competitors to replicate. Huasheng has successfully entered the Texas power grid procurement project in the U.S., demonstrating strong export capability.

**Zhongxing Electric (1513)** is the exclusive manufacturer of GIS gas-insulated switches, holding an 85% market share in Taipower’s market—almost a monopoly. It is also actively布局充電樁 (iCharging brand already deployed at highway service areas nationwide) and energy storage, with diversified order sources.

**Shidian (1503)** is an established electromechanical manufacturer involved in heavy electrical equipment and EV power systems. Its advantages include brand reputation, stable government project positions, and successful exports to Southeast Asia and the Middle East, ensuring stable and diversified revenue.

**Yali (1514)** specializes in distribution panels and electrical equipment, directly benefiting from the AI data center electricity demand of TSMC, UMC, and other wafer fabs. Orders are booked through 2027, with EPS continuing double-digit growth, making it the most profitable.

Besides these four giants, there are smart meter manufacturer Kangshu, cable leader Huaxin and Daya, energy storage solution provider Delta Electronics, and others, each digging into different segments of the industry chain.

## Is Investing in Heavy Electrical Stocks a Good Idea? Four Major Benefits Supporting Long-term Growth

**First, global grid upgrades are inevitable.** The power shortage triggered by AI is no longer a forecast but a reality—aging grids simply cannot handle the load. Large-scale grid investments are underway from Taiwan to the U.S. and Europe, with continuous orders.

**Second, the irreversible trend of energy transition.** Countries’ net-zero carbon commitments are already in writing, and green energy plants will increase significantly. Each power plant requires supporting equipment. Energy storage systems are also rapidly growing, making heavy electrical companies central to integration.

**Third, long-term policy capital support.** Taipower’s Resilient Power Grid Plan will continue to invest heavily over the next decade—this is not a short-term theme but a structural investment. U.S. subsidies also open overseas markets for companies like Huasheng.

**Fourth, industry barriers naturally form a moat.** Ultra-high voltage products like 500kV transformers and 345kV GIS have high technical thresholds and long certification periods, making it difficult for challengers to surpass leading companies—ensuring long-term profitability.

## Risks Not to Be Ignored: Overvaluation, Cost Pressures, Cyclical Concerns

Investors should also remain cautious. The P/E ratios of the four heavy electrical giants are generally between 20 and 40, reflecting market expectations of years of growth. If profits fall short, stock prices could face significant corrections.

Rising raw material costs such as copper and steel will directly erode margins. Labor shortages and supply chain delays may also impact shipments. More importantly, the industry remains cyclical—once global grid upgrade projects are completed, order peaks will subside, and the industry will face a period of stabilization.

## How to Invest in Heavy Electrical Stocks? Long-term Perspective Is Key

The four giants are entering a once-in-a-decade upward cycle, with solid fundamentals. But since stock prices have surged significantly in 2023 and 2024, the key to profit is adopting a **long-term mindset (over 2 years)** to buffer short-term volatility.

Pay close attention to financial indicators such as:
- **Monthly revenue**: whether it continues to grow year-over-year and meets market expectations
- **Gross profit margin and operating profit margin**: whether revenue translates into real profit
- **Inventory and accounts receivable**: whether operational cycles are healthy

In terms of investment strategy, rather than chasing high prices in one go, it’s better to use **dollar-cost averaging or phased entry**—buying gradually during market dips—to reduce risk.

## Taiwan Stocks vs. U.S. Stocks: Two Different Power Investment Paths

Taiwanese power stocks mainly grow from domestic demand (Taipower’s plans) and some exports (Huasheng’s U.S. market). The advantages are familiarity and clear growth momentum, but they are more affected by local policies and grid upgrade speeds.

U.S. power stocks face global demand. Companies like Eaton, Siemens, and others operate worldwide, providing complete system solutions rather than just components. Investing in U.S. stocks effectively diversifies assets across global economies, especially with the U.S. as the core, helping hedge regional risks and offering more stable long-term returns.

U.S. utilities like NextEra Energy, Southern Company, and Duke Energy offer stable dividends, with recent yields between 2%-5%. Upstream grid contractors and power equipment manufacturers like Eaton, Quanta Services, and Hubbell are also worth watching, though they tend to be more volatile and require careful timing.

In short, if you don’t have a U.S. account or are more familiar with the local market, Taiwan’s heavy electrical stocks are a good choice; for global diversification and stable cash flow, U.S. power stocks are another approach. Regardless of the path chosen, AI-driven power demand upgrades remain a long-term, structural investment theme.