Is the surge in electricity consumption an industry opportunity or a challenge? An in-depth analysis of the investment value and challenges of heavy electricity consumption

What is Heavy Electrical Power? Why Has It Suddenly Become a Capital Darling?

Heavy electrical power refers to companies engaged in the manufacturing of heavy-duty electrical equipment, engineering contracting, and maintenance services, covering the entire industry chain from power generation, transmission, distribution to electricity consumption. The performance of these companies is closely linked to national energy policies and infrastructure investments.

In the past, the power industry was viewed as a stable but slow-growth investment type. Global electricity consumption growth was predictable, and the performance of power stocks was relatively stable. However, this situation has been completely changed after the AI boom swept the globe.

Training AI models and operating large-scale data centers require enormous electricity consumption. For example, training GPT-4 consumes as much electricity as several thousand households use in a year. Tech giants like Microsoft, Google, Meta, and Amazon have publicly announced plans to significantly increase investments in AI data centers, directly boosting global electricity demand.

According to the International Energy Agency (IEA), by 2030, global data center electricity consumption will exceed double the current level, reaching about 945 TWh—this figure is already close to Japan’s total current electricity consumption. Even more astonishingly, electricity used specifically for AI-optimized data centers is expected to grow more than fourfold.

Industry Chain Reaction Triggered by AI Power Demand

As electricity demand surges, outdated power grid infrastructure cannot bear the load. Countries must undertake large-scale upgrades of power grids, build new power plants (especially green energy plants), and invest in energy storage systems to stabilize power supply.

This wave of demand directly drives the construction of substations and transformer stations, whose core equipment includes transformers, GIS gas-insulated switches, and distribution panels. These heavy electrical power devices have become the first beneficiaries in the industry chain.

For Taiwanese heavy electrical power companies, multiple positive factors are stacking up. Besides the existing “Taiwan Power Grid Resilience Plan” and “Energy Transition” themes, the global demand for AI data center orders has become a new growth engine. This has extended and strengthened the industry cycle of heavy electrical power beyond initial expectations.

Taiwan’s Four Heavy Electrical Power Giants: Who Has the Most Investment Potential?

The market is currently focused on the Four Heavy Electrical Power Giants, whose businesses mainly involve transmission and distribution equipment, while also spanning into energy storage, charging stations, and other growth tracks.

Hwa Sheng (1519) is Taiwan’s leading transformer manufacturer, with the only production line in Taiwan capable of manufacturing 500kV ultra-high voltage transformers. Since 2023, its stock price has surged over 1600%. Besides benefiting from procurement by Taiwan Power and Texas grid projects in the US, the high technical barriers in ultra-high voltage domain have built a solid moat for it.

Chung Hsing Electric (1513) is Taiwan’s only manufacturer of GIS gas-insulated switches, holding about 85% market share in Taiwan Power’s market. The company plays a key role in Taiwan Power’s resilience plan, and its electric vehicle fast-charging brand “iCharging” is strategically deployed along highways nationwide to capture charging opportunities.

Shih Electric (1503), as an established electromechanical giant, offers a product lineup covering heavy electrical equipment and electric vehicle power systems. Besides supplying major domestic projects like Taiwan Power, metro, and airports, it has successfully exported to Southeast Asia and the Middle East, ensuring stable and diversified revenue sources.

A-Li (1514) specializes in electrical equipment and distribution panels, and is a potential stock in the AI server power supply system field. Clients include semiconductor giants TSMC and UMC, with orders booked through 2027, and EPS maintaining double-digit growth consecutively.

Four Supporting Logic Pillars for Heavy Electrical Power Investment

First, the rigid demand for global power grid upgrades. Driven by AI and data centers, electricity demand is surging, and existing old grids cannot handle the load. From Taiwan, the US, to Europe, large-scale modernization investments are underway, providing continuous orders for heavy electrical power companies.

Second, the irreversible trend of energy transition. Countries pursue net-zero carbon emissions by heavily building solar and wind farms. Each green energy plant requires supporting equipment like step-up substations, transformers, and transmission/distribution devices—core businesses of heavy electrical power. Meanwhile, energy storage system construction is rapidly growing, with heavy electrical power companies playing a key role in integrating power equipment.

Third, strong policy and capital support. Taiwan’s “Resilient Power Grid Plan” will invest over NT$500 billion in the next decade. The US Inflation Reduction Act also offers massive subsidies to promote grid modernization, opening huge export markets for competitive Taiwanese firms like Hwa Sheng.

Fourth, industry barriers and oligopoly structure. Heavy electrical power equipment has high technical thresholds and long certification cycles, especially in the ultra-high voltage market, which is not fully competitive. Leading companies’ moat can sustain long-term profitability.

Risks to Consider Before Investing

The market has already priced in years of growth expectations, with leading stocks’ P/E ratios generally above 30 to 40 times, indicating obvious premiums. If profit growth falls short of expectations, stock prices could face significant correction.

Rising raw material costs will directly erode gross margins. The industry also faces labor shortages and supply chain delays, which may impact order shipments and revenue recognition.

Additionally, the industry remains cyclical. Currently at a capital expenditure peak, but once major global grid upgrade projects are completed, order peaks may gradually subside, and the industry could face a return to stable growth.

Practical Investment Strategy Recommendations

The four heavy electrical power giants are entering a once-in-a-decade industry upcycle, driven by policy, domestic demand, and export engines, with solid fundamentals. However, their stock prices in 2023-2024 have already reflected these expectations, with P/E ratios generally above 20 to 30 times.

Adopt a long-term perspective (2-3 years or more) to cope with short-term volatility. Staged entry or dollar-cost averaging is advisable—buying gradually during market dips to avoid chasing high at once.

Monitor these financial indicators to assess trends:

• Whether monthly revenue continues to grow YoY and meets market expectations
• Whether gross profit margin and operating profit margin can translate revenue growth into actual profit
• Whether inventory and accounts receivable reflect a healthy operating cycle

Ultimately, whether heavy electrical power is a good investment depends on whether the world can truly push forward with power grid modernization and green energy transition. In this context, the growth of the heavy electrical power industry is not a short-term theme but a structural shift driven by global trends. For patient long-term investors, this is indeed worth serious attention.