Bernstein's Chad Dillard on looking outside AI for AI winners

All right, in the meantime, let's try to help make you some money as we are near overall record highs because everyone's been trying to figure out which is the nonobvious company or companies that are actually AI plays in disguise. What are we talking about? Well, let's take a case in point. Caterpillar. The market figured out that CAT has a big equipment business that can help power power plants that power data centers. That's powerful. But what other companies may be AI plays in disguise? Here to help us answer that question is Bernstein, senior analyst covering machinery and electrical infrastructure, Chad Dillard. Chad, welcome to Power Lunch. Good to have you on. >> Thank you for having me on. Appreciate. >> Okay, so Caterpillar people figured out big engines, they can kind of push gas through those big pipes. Are there other companies that you follow and rate that are AI plays in disguise? >> Yeah, absolutely. And I think we need to focus on what the bottlenecks are, right? It's power and labor. On the power side, like you just said, you know, Caterpillar, it's an obvious one, power generation. Uh, but there's also another way to improve power, and that's by raising the voltage. And I'm talking about high voltage transmission lines. I'm talking about raising the voltage in data centers. Um, it'll match. >> Sounds like that's a quantervices type business. PWR, they do power lines. >> Uh, so yeah, quant services. >> You like the stock? >> They're an 800 lb gorilla uh basically in the room. Uh, but you've also got eaten as well. uh they're going to be really well positioned on the 800 volt side. Uh that's an opportunity for them to increase their their wall sharing. >> What's the kind of just backing out for a second here, how would you describe this category? Sort of say under the radar AI machinery plays. Um are they on everyone's radar now? I mean to Brian's point, isn't everyone just desperate for any little angle or or play on this? And is there any risk that data center construction could be slowed down? >> Yeah. No, definitely. So I think you know in terms of like what's under the radar I think folks you know get the fact that there's you know a labor shortage uh but there's many other opportunities to find a solution. So for example modular fabrication uh this is an emerging technology in the construction job site. You're taking the work from the field over to the manufacturing facilities. Uh this actually expands the opportunity for the the companies like Eton. Uh there's a company Legent that does a lot of the engineering procurement construction the fabrication. Um, and these are some of the names that aren't really appreciated under the radar and you don't necessarily think, you know, is going to be be there. >> And just to go back to this larger question, does it impact these businesses in in an material way right now at all that they're having? Texas moratorium on new power hookups, New York moratorium for one year. I mean, we're seeing a little bit of momentum around those trying to hold rapid construction of data centers. >> Yeah, that's a great question. So I think we need to take a a zoom out and really think about the fact that the pipeline of projects have increased by 3x for data centers just to put some numbers around it. 300 gawatt that's as much power as almost as much power as the US consumes. >> Wow. >> And so if you if you think about um the amount of delays and cancellations obviously they go up when you have your pipeline going up. Uh and we track this you know it's been about 11% of of stranded capacity that's you know been existing over the last you know couple of months. That really hasn't changed. So no no no change in terms of kind of the projects being called off just what you would expect from overall >> increase. Exactly. I mean the quantum of opportunity is absolutely massive. Uh and we're still you know short labor. uh we're still short power and a lot of these companies, you know, solve that problem and you want to be where the bottlenecks