Equity research
2026.07.07 00:35

Jefferies: Data Center & Power Demand

> Massive Deficit: Demand for data centers continues to heavily outpace supply. In 2025, only 8.9 GW of capacity was lit in North America against nearly 21.1 GW of demand, resulting in a ~12 GW deficit.

> Extended Timelines: Hyperscalers traditionally commit to capacity deliverable within 12–18 months, but due to constraints, this window is expected to widen to 24+ months.

> Hyperscaler Capex Scaling: Mega-cap tech capital expenditure is on pace to reach $770B in CY26E (up 74% YoY), which is nearly 5x the $156B deployed in CY23.

> AI Chip Metrics: Bottom-up accelerator chip sales imply ~30 GW of global AI power demand in 2026E. North America accounts for 19 GW of this demand, nearly double the 10.3 GW of new capacity expected to come online.

> Surging Backlogs: The combined cloud backlog surged to $2T in 1Q26, growing three times faster than capex since 2023.

The Six Physical Supply Constraints

> EPC / Construction Labor (2026 Binding Constraint): Reaches its supply ceiling at 10.4 GW. Access to skilled craft labor and electrical trades is currently the most significant bottleneck in the ecosystem.

> Cooling Systems (2028 Binding Constraint): Reaches an 11.4 GW ceiling in 2026 and becomes the primary binding constraint from 2028 onward as chip densities demand highly complex liquid- and hybrid-cooling architectures.

> Power Availability: Set at an 11.6 GW ceiling for 2026. While technically above labor/cooling limits, the US interconnection queue faces long wait times (median 5–8 years). Behind-the-meter (BTM) solutions are increasingly emerging as workarounds.

> Electrical Equipment: Bounded at 12.4 GW. Backlogs for critical components like switchgear are expanding at 2–4x the rate of revenue delivery, with lead times reaching 52–65 weeks.

> Power Transformers: Bounded at 13.2 GW. Lead times for custom-engineered large power transformers routinely exceed 24 to 36 months.

> Power Transformers: Bounded at 13.2 GW. Lead times for custom-engineered large power transformers routinely exceed 24 to 36 months.

$GE Vernova(GEV.US) $Vertiv(VRT.US) $Trane Tech(TT.US) $Carrier Global - WI(CARR.US) $Forgent Power Solutions(FPS.US)

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