Eaton investors worried that DeepSeek may torpedo the AI data center trade breathed a little easier Thursday, one day before the U.S. industrial company reports quarterly earnings. Shares of power management provider Eaton have stabilized since Monday’s more than 15% decline, reflecting a growing sentiment on Wall Street that the Chinese startup’s more efficient, lower-cost artificial intelligence model won’t substantially dampen the buildout of data centers needed to run those heavy computing workloads. The Club stock rose 3% Thursday, stringing together a three-day win streak to recover some of what it lost in Monday’s carnage. ETN YTD mountain Eaton (ETN) year-to-date performance While at the center of numerous megatrends, such as digitization and infrastructure, outfitting data centers is Eaton’s fastest-growing end market and second largest by revenue. The company’s electrical products are needed to help energy-intensive AI data centers run properly. Along with AI chipmakers, such as Club names Nvidia and Broadcom , Eaton was slammed Monday on the initial concerns that DeepSeek’s advancements would reduce demand for high-powered semiconductors — and by extension, the data centers that house the chips. However, for Eaton in particular, we drew a level of comfort from what Club names Meta Platforms and Microsoft reported Wednesday evening alongside their quarterly earnings about their upcoming capital expenditure plans. The near-term calculus for Nvidia looks a bit different, as Jim Cramer explained in a column earlier Thursday . CEO Mark Zuckerberg said Meta won’t slow down on AI spending , reiterating guidance that was announced Friday before DeepSeek went viral. “I continue to think that investing very heavily in capex and [infrastructure] is going to be a strategic advantage over time,” Zuckerberg said during Meta’s post-earning conference call. Microsoft helped assuage concerns that DeepSeek’s model would lead to fewer data centers than previously thought. But CEO Satya Nadella said on Wednesday’s earnings call that he expects to see “exponentially” more AI demand as the technology evolves. He added that company revenue growth was constrained by not having enough data centers. “Despite concerns of cloud capex slowdown from DeepSeek’s notable AI efficiency pushes, we highlight strong AI capex commentary from META and MSFT,” Bank of America analysts said Thursday. “Both companies continue to see their capex increase through [calendar year 2025 and 2026],” BofA added. Dover CEO Richard Tobin followed suit Thursday morning during the Club holding’s quarterly earnings call. On the future of data center construction, it was nice to hear Tobin say the “outlook for thermal connectors for liquid cooling data centers is robust.” He added, “Our preemptive capacity expansion has allowed us to maintain industry-best lead times in what has turned out to be a short cycle business.” Data center backdrop The data center trend doesn’t seem to be letting up anytime soon. Just last week, President Donald Trump unveiled a joint venture with ChatGPT creator OpenAI, Japan’s SoftBank and tech giant Oracle to invest up to $500 billion into AI infrastructure in the U.S. Although that White House announcement came before DeepSeek’s ascent, a top executive at Blackstone — which has invested $80 billion in data center assets — said Thursday that many of the group’s biggest customers have confirmed their plans remain unchanged. “As we get more and more compute, we’re still going to need a lot of infrastructure,” Blackstone President and COO Jon Gray told CNBC after Blackstone’s earnings report. “We’re still going to need a lot of energy and power to really make this future happen. We continue to believe this.” Some on Wall Street grew a little more cautious on Eaton shares and its data center business into quarterly earnings. Melius Research analysts downgraded the industrial stock to hold from buy on Tuesday, though they said Eaton remains “a core long-term holding.” “Whether DeepSeek is legitimately disruptive or not, it is not our battle to fight. It does, however, raise the risk that this AI capex arms race has peaked,” the analysts, who cut the ratings on three other industrial names as well, wrote in a note to clients. “If nothing else, the positive capex revisions part of the spend cycle seems to have peaked, and with perhaps way more downside than upside at this point.” The firm added, “While the violent market reaction [Monday] helps discount a lot of this risk, we do not see an easy outperformance pathway for these stocks from here in ’25.” Bottom line Ahead of earnings Friday, the Club took advantage of Eaton’s sell-off earlier this week, buying back shares we sold at higher levels in late October and upgrading it to a 1 rating . The recent data center commentary from executives at fellow portfolio names and elsewhere is encouraging. But there’s also more to Eaton that just data centers. The company is at the heart of many other megatrends such as the energy transition, infrastructure spending, electrification and more. As Jim recently said best, “We just need Eaton to continue doing what it is doing.” (Jim Cramer’s Charitable Trust is long ETN, NVDA, MSFT, META, DOV. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Eaton Corporation signage at the NYSE
Source: NYSE
Eaton investors worried that DeepSeek may torpedo the AI data center trade breathed a little easier Thursday, one day before the U.S. industrial company reports quarterly earnings.
