Data center capex boom drives power, industrial demand into next decade

The AI infrastructure build-out is accelerating, with hyperscalers committing $725 billion to capex. Mitsubishi Heavy Industries reported that global gas turbine orders will "decline slightly" from 2025 but remain strong due to the surge in data center buildouts. Siemens Energy's CFO noted that the company is benefiting from surging AI-driven demand for power-hungry data centers, especially in the US, with demand expected to extend into the next decade. This capex cycle is broad-based and durable.

Equipment suppliers and industrial players are retooling for sustained demand. Innio, a gas engine manufacturer backed by Advent, filed for a US IPOInitial Public Offering - a company's first public sale of stock. specifically to tap the data center capex wave. Flex, a major electronics manufacturer, is spinning off a $6.5 billion AI infrastructure business under new leadership. Hyperscale companies are also buying physical assets: Amazon reported negative $18 billion free cash flowCash generated after maintenance capex; the actual money the business throws off. in Q1 2026 after $44 billion in property and equipment purchases, yet the stock rallied 45% over six months as investors treated this as capex-in-service rather than a liquidity concern.

The AI-driven capex narrative is displacing traditional earnings-driven equity narratives. Palantir pointed out that when US revenue doubles year-over-year and hyperscalers are committing $725B to AI infrastructure, the only question is which companies are not going all-in on AI and how much longer they can afford not to. Defense and infrastructure names are also winning: European defense coordination is improving (CV90 armored vehicle production), and industrial real estate is re-rating as logistics and warehouse space become premium assets for automation and fulfillment.

But momentumThe empirical fact that winners keep winning over the medium term. could shift if capex forecasts disappoint or if rising bond yields (driven by inflationThe rate at which prices rise across an economy. and geopolitical stress) push financing costs higher for mega-cap capex programs. Tech earnings are carrying the stock market more than the Iran war, according to strategists, but if earnings growth slows due to execution challenges or margin pressure from elevated input costs and power prices, the multiple expansion story fades. Additionally, AI hardware cycles have historically compressed as competition intensifies; leaders must deliver breakthrough efficiencies or risk capex rationalization by cash-strapped buyers.