Recently, I noticed a quite interesting market phenomenon: the explosion of AI and data centers is fundamentally changing the investment logic in the electricity industry. In the past, electric utility stocks were always considered stable dividend-paying options, but now the situation is completely different.

Think about it, training a large AI model consumes as much electricity as several thousand households' annual usage. Hundreds of millions of users worldwide are using ChatGPT, Midjourney daily, and the data centers behind them must operate 24/7. Tech giants like Microsoft, Google, Meta, and Amazon have publicly announced significant increases in investment in AI data centers, directly boosting global electricity demand. According to the International Energy Agency, by 2030, the world's data center electricity consumption will more than double from now, reaching about 945 TWh.

What has this demand driven? Upgrades to power grids, energy storage systems, renewable energy—all need to be built faster. Orders for substations and transformer stations are surging, and the core components of these facilities are transformers, switches, and distribution panels. This is precisely why electric power concept stocks have suddenly become the hottest topics in the stock market. Taiwan’s top four heavy electrical equipment companies, like Hua Cheng, saw their stock prices soar over 1,600% in 2023, serving as a prime example.

In simple terms, electric power concept stocks refer to listed companies involved in manufacturing heavy electrical equipment, engineering contracting, and services. They participate in every stage—from power generation, transmission, distribution, to electricity consumption. The performance of these companies is closely related to government energy policies and infrastructure investments. So, when AI electricity demand surges and the government promotes grid upgrades, they are the first beneficiaries to receive orders.

Market focus is on the four major heavy electrical companies. Hua Cheng is Taiwan’s leader in transformer technology, with the only production line in Taiwan capable of manufacturing 500kV ultra-high voltage transformers, with the highest technical threshold. Chung Hsin Electric is Taiwan’s sole producer of GIS gas-insulated switches, playing a key role in Taipower’s resilient grid plan, with about 85% market share. Shih Electric is an established electromechanical giant with a broad product line, from heavy electrical equipment to electric vehicle power systems. A-Li specializes in electrical equipment and distribution panels, serving clients like TSMC and UMC, with orders booked through 2027.

Besides the four giants, there are other electric power concept stocks worth watching. Smart meter concept stocks include KangShu, Tatung, and JiuDing Power; wire and cable stocks include Hua Xin, Da Ya, and Hong Tai; energy storage concept stocks include Delta Electronics and Tianyu. All benefit from the wave of energy transition.

From an investment perspective, the heavy electrical industry has significant growth potential over the next 3 to 5 years or even longer. There are four main bullish factors: global grid upgrades and power shortages, the irreversible trend of energy transition, strong policy and capital support (TaiPower’s resilient grid plan is expected to invest over NT$500 billion over ten years), and the industry’s high technical barriers and oligopolistic nature.

However, risks should also be noted. Leading stocks already have P/E ratios generally above 30 to 40 times, with the market pricing in years of growth expectations in advance. Rising raw material costs could erode profit margins, and labor shortages or supply chain delays might impact shipments. Moreover, once major global grid upgrade projects are completed, order peaks may gradually subside.

My personal view is that the four major heavy electrical companies are indeed entering a once-in-a-decade industry upcycle, but their stock prices in 2023-2024 have already largely reflected these expectations. Therefore, the bullish factors in this industry will take time to fully manifest. It’s advisable to adopt a long-term approach (2-3 years or more) to protect against short-term volatility, using dollar-cost averaging or phased entry strategies—buying gradually on dips to avoid chasing high at once.

Additionally, you can also pay attention to U.S. utility companies. Taiwanese electric power stocks mainly focus on components like transformers, GIS switches, and distribution panels, acting more as suppliers of parts. U.S. heavy electrical stocks offer complete system solutions, from hardware to software, with stronger integration capabilities, and face global demand unaffected by regional policies. Companies like NextEra Energy, Southern Company, Duke Energy, American Electric Power, Dominion Energy, and Entergy are key U.S. utility stocks worth watching.

If you want to invest in the upstream of the U.S. power supply chain, consider companies like Eaton Corporation (power equipment management), Quanta Services (grid construction and services), and Hubbell Incorporated (power transmission and distribution hardware). However, these companies tend to have more volatile earnings than utilities, and their stock prices are more sensitive to order cycles, so careful timing and risk management are necessary.

In summary, whether in Taiwan’s electric power concept stocks or U.S. power-related investments, they are all benefiting from the global increase in electricity demand driven by AI. The key is to understand the underlying logic, assess your risk tolerance, and develop a suitable investment strategy.