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Best 6 Data Center Companies We Found

On my morning run today I was discussing back and forth with Gemini and Claude, what the best pick-and-shovel plays can be around datacenters. Who will they need to win? How will they secure enough electricity fast? Who can make them more efficient, so they need less electricity in the first place? It was fun, and got me started. Back on the desk, a few hours later, here the final result. The best six companies across the power infrastructure value chain based on ROIC profile and 5-year CAGR potential.

Market dynamics driving investment opportunity

The global data center power infrastructure market is projected to grow from $20.21 billion in 2024 to $42.35 billion by 2030 at a 13.2% CAGR. AI racks require 3-4x more power than traditional servers (50-100kW vs 5-10kW), while hyperscaler capex is expected to reach $300-335 billion in 2025. This fundamental shift creates substantial opportunities for companies providing power generation, efficiency, cooling, and connectivity solutions.

Two distinct investment themes emerge: power generation companies helping data centers quickly access reliable electricity, and technology companies making data centers more power-efficient through advanced cooling, networking, and chip-level optimization.

Company analysis and rankings

1. Arista Networks (ANET) - The AI networking champion

ROIC Profile: Arista delivers industry-leading returns with 54-55% ROIC, consistently maintaining this exceptional level through superior capital efficiency and an asset-light business model. The company's 65% gross margins reflect strong pricing power and technology differentiation in data center networking.

5-Year CAGR Potential: 18-22% driven by 80% revenue exposure to data center markets and dominant position in AI networking infrastructure. The enterprise campus market expansion from $41 billion to $70 billion by 2028 provides additional growth vectors beyond hyperscaler relationships.

Investment Quality: Minimal debt with strong free cash flow conversion enables consistent shareholder returns. R&D investment of ~14% of revenue maintains technology leadership in 800G Ethernet and AI-optimized networking solutions. Recent four-for-one stock split and $1.5 billion buyback authorization demonstrate capital allocation discipline.

Competitive Moat: High switching costs through EOS software integration and deep hyperscaler relationships create sustainable advantages. Meta and Microsoft each represent over $1 billion in annual revenue, reflecting strategic partnership depth.

2. Astera Labs (ALAB) - Pure-play AI connectivity leader

ROIC Profile: Current 2.62% ROIC reflects growth-stage investment phase, but improving rapidly with scale benefits. 75% gross margins and asset-light semiconductor model position for substantial ROIC expansion as volumes increase.

5-Year CAGR Potential: 25-35% representing the highest growth opportunity among analyzed companies. 100% exposure to AI data center connectivity with first-mover advantage in PCIe 6.0/CXL technology. Chips deployed in over 80% of AI servers provide market validation.

Investment Quality: Net cash position of $1.03 billion provides financial flexibility for growth investments. R&D intensity of ~20% of revenue focuses on next-generation connectivity standards. Strong $210 million free cash flow generation demonstrates business model scalability.

Strategic Position: Leadership in open standards (PCIe, CXL, UALink) creates platform advantages with major hyperscalers. Deep integration with NVIDIA and AMD AI architectures increases switching costs and revenue visibility.

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3. Vertiv (VRT) - Critical infrastructure solutions leader

ROIC Profile: 16.78% ROIC exceeds cost of capital with 26% ROE demonstrating strong operational leverage. Expanding margins reflect successful positioning for AI infrastructure demands, with target of 25% operating margins by 2029.

5-Year CAGR Potential: 15-20% supported by 80% revenue exposure to data center markets and 23.5% market share in global data center cooling. AI rack densities requiring 3-4x traditional power/cooling create substantial addressable market expansion.

Investment Quality: Strong balance sheet supports growth investments in liquid cooling technology. 30% organic order growth (trailing twelve months) provides revenue visibility, while service revenue component adds stability.

Market Leadership: Dominant position in thermal management with advanced liquid cooling solutions essential for high-density AI computing. Global service network and customer relationships with hyperscalers provide defensive characteristics.

4. GE Vernova (GEV) - Power generation infrastructure leader

ROIC Profile: 8.23% ROIC improving from spin-off baseline with margin expansion across all segments. 55GW gas equipment backlog with enhanced margins demonstrates improving capital efficiency and market positioning.

5-Year CAGR Potential: 12-15% driven by electrification segment 20% organic growth and power segment 6-7% growth. 33% of slot reservations linked to data center projects, with $500 million Q1 2025 electrification orders providing momentum.

Investment Quality: Net cash position of $6.43 billion and minimal debt (0.11 debt/equity ratio) provide financial strength. $2.71 billion free cash flow with $1 billion year-over-year improvement demonstrates operational progress.

Strategic Value: 25% global power generation market share with leadership in gas turbines essential for data center primary power. Partnerships with hyperscalers through Chevron/Engine No. 1 create 4GW development pipeline.

5. Caterpillar (CAT) - Backup power and distributed generation

ROIC Profile: 14.14% ROIC consistently above cost of capital with 55.65% ROE (elevated by financial services). 18% operating margins reflect operational efficiency across diversified industrial portfolio.

5-Year CAGR Potential: 10-12% as Energy & Transportation segment ($28.9 billion) now exceeds Construction segment, reflecting strategic repositioning. 125% manufacturing capacity increase for data center engines demonstrates market commitment.

Investment Quality: Strong capital returns with $10.3 billion returned to shareholders in 2024 ($7.7 billion buybacks, $2.6 billion dividends). 180.1x interest coverage provides financial stability despite higher leverage from financial services.

Market Position: Leadership in 2-4 MW generator sets for backup power and distributed generation. Primary power solutions for facilities without utility access, with hydrogen fuel cell partnerships expanding addressable market.

6. Linde (LIN) - Industrial gases and cooling infrastructure

ROIC Profile: 25.9% ROIC represents industry-leading capital efficiency with five consecutive years of improvement. 29.5% operating margins with 190 basis points expansion demonstrate pricing power and operational excellence.

5-Year CAGR Potential: 6-8% reflects indirect exposure to data center growth through cooling applications and specialty gases. 59 small on-site projects in 2024 driven by electronics demand show growing relevance.

Investment Quality: 32 consecutive years of dividend increases with $6.00 annual dividend and 40.71% payout ratio demonstrate sustainability. $9.4 billion operating cash flow supporting $7.1 billion shareholder returns.

Supporting Role: Cooling gases for liquid cooling systems, specialty gases for semiconductor manufacturing, and clean hydrogen for fuel cell applications provide indirect but growing data center exposure.

Investment recommendations and portfolio construction

Tier 1 positions: Core AI infrastructure plays

Arista Networks emerges as the top-ranked opportunity combining exceptional ROIC (55%) with strong growth potential (18-22%). The company's dominant position in AI data center networking, sustainable competitive moats through software integration, and direct exposure to hyperscaler infrastructure buildout create compelling risk-adjusted returns.

Astera Labs ranks second with the highest growth potential (25-35%) and improving ROIC trajectory. Pure-play exposure to AI connectivity solutions and first-mover advantages in critical technologies justify growth-stage valuation premium.

Tier 2 positions: Diversified infrastructure exposure

Vertiv provides strong risk-adjusted exposure with solid ROIC (16.78%) and attractive growth (15-20%). Market leadership in critical cooling infrastructure and improving margin profile support premium valuation.

GE Vernova offers defensive power generation exposure with improving financial profile and growing data center relationships. Strong balance sheet and market leadership provide downside protection.

Portfolio concentration risks and mitigation

Customer concentration represents the primary risk factor across top-ranked companies, with significant exposure to hyperscaler capex cycles. Economic sensitivity affects industrial companies (Caterpillar, GE Vernova) through cyclical demand patterns.

Valuation risk requires careful position sizing given premium multiples across growth-oriented names. Technology obsolescence risk necessitates continuous innovation investment, particularly for semiconductor and networking companies.

Strategic investment thesis

The data center power infrastructure opportunity represents a multi-decade secular growth trend driven by AI adoption and digital transformation. Companies with direct exposure to AI-specific infrastructure needs offer the highest return potential, while established industrial players provide portfolio diversification and defensive characteristics.

Portfolio construction should emphasize Arista Networks and Astera Labs as core positions, with Vertiv and GE Vernova providing complementary exposure across the power infrastructure value chain. This approach maximizes participation in AI infrastructure buildout while managing concentration and execution risks through diversified positioning.

Right now it sits on my watchlist, which you can access in real-time in our community.

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