Cable manufacturers: The pure players of the Golden Age of Electricity & AI
Prysmian and Nexans are connecting all the megatrends but are still misunderstood and cheap vs history
Electricity is the new oil: Electricity demand is surging after two decades of stagnation, driven by AI data centers, electrification of transport, and aging infrastructure. Yet grids, neglected for decades, are now the bottleneck. This imbalance is triggering one of the largest infrastructure investment cycles in history.
Cable makers, lead by Prysmian and Nexans, are the real winners at the heart of this tidal wave of investments, turning them from boring commodity plays to some of the most important companies in the world, with under-appreciated margin expansion and valuation upside at the same time as they have derated.
In this write up, I dive into how Prysmian and Nexans connect all these megatrends of electrification, reshoring, grid investment supercycle and AI and why they are exceptional investments.
Just some numbers to give you a sense of what I am talking about:
The IEA’s Net Zero scenario calls for $800 billion per year in grid investments by 2030, more than 2.5x today’s level.
The IEA estimates that for every $1 invested in renewables, at least $1 must go into networks and $1.25 in advanced economies. Yet today, only 22 cents go into the grid for every dollar spent on power generation.
In the EU, annual investments in electricity networks are expected to double during 2020–2030 from EUR36bn/year in 2019 to EUR71bn/year. Between 2030–2050, they are forecast to quadruple to EUR134bn/year.
Europe’s grid is 45–55 years old. The US grid isn’t much younger. Meanwhile, over 3,000 GW of renewable energy projects are stuck in grid connection queues, five times the amount of new solar and wind added globally in 2022.
AI data centers are poised to contribute >50% of the incremental growth in electricity demand in the US in the coming years, and AI investments are accelerarting fast with the total AI spend through 2030 now expected at $3-4tn!
Twice a week, I will release deep dives into stocks and sectors that fit into the three themes that I see winning in this age of tariffs and deglobalization: resilience, sovereignty & reshoring, China. I will then deep dive into the opportunities in the AI data center value chain.
Take advantage of this once in a generation opportunity to build long term wealth by investing in great stocks that will deliver returns for your portfolio for years to come.
Table of content:
A Golden Age of Electrification - An electricity boom like we have never experienced before creates structural opportunities
Cables, which were once seen as boring commodities are now very hot commodities
Cable makers are AI infrastructure pure plays
Cable makers have derated vs Electrical names and other peers, despite stronger growth profiles, the market might be missing something
Prysmian (market cap: EUR24bn) - Global cable leader entering a golden age
Nexans (market cap: EUR6bn) - Electrification pure play with visibility into 2030
