Thematic hub | Industrial | Electrical equipment

What are electrical equipment stocks?

Electrical equipment is an industrial subsector that provides parts and components to different industries. These companies manufacture the specialist parts that allow industrial processes to function.

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Electrical equipment companies function like most comparable subsectors by selling to other industrial clients rather than private individuals, with the energy sector one of the largest buyers of electrical equipment. Classic electrical equipment products include transformers, relays, or electric motors, alongside newer products such as EV charging equipment. Electrification is a strong secular trend which creates a favourable market environment for electrical equipment, and electro industry is a high-performing sector with both growth and defensive characteristics.

The difference between electrical equipment and tech stocks

Electrical equipment differs from consumer technology or high-tech manufacturing in several ways. Because they sell essential products to large corporate clients, revenue stability is considerably higher than for consumer tech. Large electrical equipment stocks like GE Vernova (not to be confused with GE Aerospace) provide electrical motors or relays which are required for all forms of energy production and whose manufacture involves specialised knowledge that provides a steep barrier to entry. All of these characteristics make electrical equipment one of the most stable industrial subsectors, known for its dividend paying stocks and defensive character.

What moves stock prices?

Why investors watch this sector

Electrical equipment and parts form a strong defensive subsector within a broader cyclical sector, industrial stocks. Because electrical equipment is expensive and essential for the operations of most industries, these companies have a stable client base and good revenue visibility. The largest electrical equipment stocks are known for paying dividends and the sector, which shares in the general link to economic growth seen across industrial stocks, combines elements of cyclical growth stocks with defensive investment characteristics.

Sector Highlights

Global market size: Electroindustry contributed nearly $260 billion to the US economy in 2024. The market capitalisation of US electrical equipment stocks, without including the largest conglomerates involved in multiple business lines, is about $150 billion, though this figure underestimates the significance of the sector.
Top stocks: GE Vernova, Eaton Corporation, Ametek
Important themes: Electrification, AI and data centres, tariffs.

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Important electrical equipment stocks

Pricing from TradingView is indicative and does not represent ADSS pricing.

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Market trends impacting electrical equipment stocks

The number of industries impacted by electrification, after a period of relative stability following the initial move away from steam power, has steadily expanded. The first wave of electrification took place from the 1910s and saw light industry switching to electrical power from steam or other thermal sources. Electric lighting gradually replaced gas from the 1920s to 1960s in most contexts, and passenger rail was largely electrified by the mid-twentieth century.

Transportation is a much more recent target industry, but now accounts for a large proportion of potential market growth. Electric vehicles are projected to increase their market share over the coming decades, and have already generated enormous demand for new components. Heating remains a mixed market with a large contribution of gas, but electrification has quickened pace considerably since the 1990s. All of these developments caused substantial growth opportunities in the electrical equipment stock sector.

Data centre expansion and power density

Data centre construction is a rapidly growing market for electrical equipment, with facilities requiring extensive power distribution. The concentration of computing equipment creates extremely high power densities compared to traditional commercial buildings, necessitating specialised electrical designs and the use of fine components. Massive investments in AI training facilities will consume even more power than conventional data centres, and since utilities struggle to provide the required capacity in many regions, this causes bottlenecks that limit data centre development.

Electrical equipment companies serving this market benefit from premium pricing for high-specification products and have seen significant stock price appreciation as investors recognise the growth trajectory of AI infrastructure. However, these valuations create vulnerability to any slowdown in data centre construction, whilst the concentration of demand in this segment means companies heavily exposed to data centres face greater volatility than diversified competitors. As with any growth industry seeing rapid investment, it is possible overcapacity will lead to a future demand slump.

Supply chain complexity and commodity exposure

Electrical equipment manufacturers source substantial quantities of copper, steel, aluminium, and other commodities, creating exposure to raw material price volatility. Copper content in transformers and wiring means commodity price movements directly impact production costs and margins. Unlike some industrial sectors where commodity costs can be passed through to customers quickly, electrical equipment often sells through project bids or catalogues with fixed pricing, limiting short-term price adjustment ability. This creates margin pressure during commodity price increases, particularly for companies with long order backlogs at previously established prices. Stock prices typically decline when copper prices surge rapidly, as investors anticipate margin compression before companies can adjust pricing.

Additionally, electrical equipment supply chains involve components from multiple countries, with semiconductors, electronic components, and raw materials sourced globally. Trade tensions and tariffs complicate procurement, whilst the concentrated nature of transformer manufacturing capacity creates supply constraints during high demand periods. Companies with diversified supply chains and effective commodity hedging programmes demonstrate more stable earnings and consequently less volatile stock price behaviour than competitors exposed to raw material cost fluctuations. Electroindustry is also a high-priority target for tariff-driven reshoring efforts, so investors in this sector need to be aware of the associated risks.

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FAQs

What companies are included in the electrical equipment sector?

The electrical equipment sector includes companies that manufacture specialised electrical components such as transformers, motors, and relays for industrial clients. Unlike consumer technology firms, these manufacturers sell primarily to corporate clients across energy, manufacturing, and infrastructure industries. Leading electrical equipment stocks include GE Vernova, whose clients are mostly power generation companies, but there are many other sectors that use these products. The sector encompasses both large diversified manufacturers and smaller specialist firms focusing on specific product categories within industrial electrical components.

Why do investors consider electrical equipment stocks defensive investments?

Electrical equipment stocks combine defensive characteristics with exposure to industrial growth, making them attractive for balanced portfolios. These companies sell to large corporate clients, providing stable revenue streams that aren’t subject to consumer discretionary spending patterns. Major electrical equipment manufacturers are known for paying consistent dividends, whilst the expensive and irreplaceable nature of their products ensures ongoing demand regardless of economic conditions. However, the sector still benefits from electrification trends and infrastructure investment, offering growth potential alongside defensive stability that appeals to investors seeking lower-volatility industrial exposure.

How does electrification impact the electrical equipment industry?

The electrification trend, now over a century old but still finding new target industries, offers substantial growth opportunities for electrical equipment manufacturers. Transportation electrification, particularly electric vehicles, is one of the most significant demand drivers for new components including EV charging equipment and specialised power management systems. Data centre expansion driven by AI development also requires extensive power distribution infrastructure with extremely high power density specifications, commanding premium pricing. Additionally, ongoing heating electrification and grid modernisation projects sustain long-term demand. These secular trends position the electrical equipment industry favourably, though companies face commodity exposure and supply chain complexity that can impact margins and cause stock price volatility.