Power Up with Hitachi Energy
Unleashing Profits in the AI Data Center Boom
By Martin Fritz, Tokyo
Artificial Intelligence growth ignites momentum for Hitachi.
Bold moves rule the game, as Hitachi Energy can testify. Four years ago, the Japanese conglomerate invested a whopping $10.8 billion to acquire ABB's power division, an ambitious step to focus on renewable energy integration and digitalization in the energy sector. The merging of ABB's technology with Hitachi's digital Lumada platform was intended to pave the way for opportunities in the realm of decentralized energy supply and eco-friendly solutions [1].
Fast forward to today, Hitachi Energy (formerly "Hitachi ABB Power Grids") is the main engine driving company profits. The success of the acquisition isn't just chalked up to smart calculations; it's due in large part to the explosive demand for power grid equipment fueled by the surge in artificial intelligence (AI) data centers [1].
The International Energy Agency predicts that global power demand for AI data centers will soar 2.3 times, jumping from 430 terawatt-hours in 2022 to 1,050 terawatt-hours by 2026 [2]. Furthermore, the expansion of renewable energies and growth in emerging markets necessitate the construction of a staggering 80 million kilometers worth of distribution networks. As a result, Hitachi Energy forecasts a dramatic sales spike, aiming to double their revenue to a staggering $30 billion by 2030, compared to the current fiscal year [1]. Presently, the power division accounts for an incredible 23% of the company's revenue, leading the charge.
CEO Andreas Schierenbeck, based in Zurich, likens the increased demand for power distribution and transformers to a "supercycle," anticipating the trend to last between 10 and 20 years [1]. Hitachi Energy reeled in $12.5 billion in new orders in just the first half of the year [1]. While meeting this demand may prove challenging, Schierenbeck stresses that it likely won't happen overnight. Power providers' projects will face delays, and existing infrastructure will need to operate for extended periods. One thing is certain: the strain on the power infrastructure is palpable, especially when it comes to transformers [1].
Hitachi Energy's stock has skyrocketed recently, largely due to successful restructuring and a sharp focus on power grids, railways, and digital services, coupled with strategic divestment of other businesses [1]. Over the past twelve months, the stock has nearly doubled, propelled by the anticipated growth, particularly in the power grid sector [1]. As of now, Hitachi's market capitalization ranks fourth in Japan at 18.6 trillion yen (116 billion euros), falling behind Toyota, MUFG, and Sony [1]. However, its price-to-earnings ratio has climbed to a lofty 28, while its price-to-book ratio of 3.4 and price-to-sales ratio of 2 are relatively high for a Japanese stock. The return on equity of 5.5% and dividend yield of 1% are also below average [1].
Undeterred, Hitachi aims to match the price-to-earnings ratio of digital companies by strengthening its digital platform, Lumada [1]. Optimism remains high among analysts, with Stefan Rheinwald, Head of Equity Analysis at Waverton Investment, predicting growing profit potential in power distribution, rail transport, and digital technologies [1]. Comgest, a portfolio manager, boosted its Hitachi stake as a 'geographical diversification' from buying U.S. tech stocks, according to Richard Kaye [1]. "The stock is still undervalued as investors have yet to fully account for its growth potential," Nikkei quoted the analyst [1].
Hitachi's financials have also benefited from the weak yen, as the company generated 62% of its revenue overseas last year [1]. Both the power grid business and the rail division have a strong presence in Europe, while the system development is primarily based in Japan, ensuring stability [1]. Additionally, overseas power infrastructure projects are less sensitive to short-term macroeconomic factors [1].
Hitachi Energy India recently reported a substantial increase in net profit, soaring by 62% to Rs 183.9 crore in the March 2025 quarter. Revenues also increased substantially, reaching Rs 1,921.85 crore, up from Rs 1,699.20 crore in the previous year [5][6]. Furthermore, the company saw a significant increase in order inflows, with a 55.7% year-over-year rise in the quarter ended March 31, 2025. The order backlog stood at Rs 19,245.9 crore, marking the highest-ever year-end backlog and providing strong revenue visibility for future quarters [5][7].
These dynamics suggest that Hitachi Energy's direct involvement in the AI data center market, though not explicitly stated, could present significant opportunities for growth. The company's strategic approach to the energy transition and infrastructure modernization positions them perfectly to support the data center industry's growing need for efficient, sustainable power solutions [2][3].
References:
[1] Financial Times[2] International Energy Agency[3] Asia Nikkei[4] Economic Times[5] Stock Market Pulse[6] CNBC TV18[7] Mint
- Investing in Hitachi Energy's power division, particularly focused on renewable energy integration and digitalization, provides opportunities in the realms of decentralized energy supply and eco-friendly solutions, given the explosive demand for power grid equipment due to the growth in artificial intelligence (AI) data centers.
- The progressive expansion of renewable energies and growth in emerging markets necessitate the construction of a vast distribution network, which will contribute to Hitachi Energy's forecasted dramatic sales spike and aim to double their revenue to an impressive $30 billion by 2030.
- Technology is playing a crucial role in Hitachi Energy's success, as the company enhances its digital platform, Lumada, striving to match the price-to-earnings ratio of digital companies to demonstrate growing profit potential in power distribution, rail transport, and digital technologies.
