Key Points
Data centers can’t simply shut down when the grid fails. That’s why these facilities require enormous backup generators capable of providing electricity almost immediately.
That’s exactly what Cummins (NYSE: CMI) provides. The company best known for diesel engines also happens to be a major supplier of backup power for data centers, and that’s becoming increasingly valuable as AI spending soars.
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S&P Global estimates that Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Oracle (NYSE: ORCL) will collectively spend approximately $750 billion on capital expenditures in 2026, equal to about 38% of their combined revenue. Much of that spending is being driven by AI and the data centers required to support it. Cummins is already cashing in.
Not a one-quarter phenomenon
During the second quarter, Cummins’ Power Systems sales jumped 19% year over year, driven by strong global demand for data center power equipment. Segment EBITDA margin also reached 24.5%, up from 22.8% a year earlier.
This isn’t just a one-quarter phenomenon, either. Cummins says its growth in the data center market is being driven partly by sales of diesel and natural gas generator sets used for backup power, as AI racks are becoming more power-hungry.
Cummins says traditional data center racks averaged around 12 kilowatts, while next-generation AI racks could reach 600 kilowatts or more. The more electricity these facilities consume, the more backup generating capacity they need when the grid goes down.
Image source: Getty Images.
Cummins is moving beyond backup power
Cummins is also starting to sell generators that don’t simply wait around for an outage. In June, the company announced an agreement with Circe Energy to provide high-powered natural gas generators for a large high-performance-computing data center in West Texas. Those generators will be part of a behind-the-meter microgrid providing primary power, with deliveries scheduled from 2026 through 2030.
That’s a huge opportunity. Grid connections can take years, and AI developers don’t necessarily want to wait. Cummins can now potentially sell generators both as emergency backup and as a bridge, or even alternative, to traditional grid power.
An industrial stock riding the AI boom
Make no mistake: Cummins isn’t an AI pure play. Trucks, engines, components, and industrial equipment remain major parts of its business. But AI is also serving as a catalyst for a new form of revenue generation for the company.
The truth is, you don’t have to bet on which AI model wins or which semiconductor eventually replaces today’s graphics processing units. The world’s largest technology companies are spending hundreds of billions of dollars building computing infrastructure, and every one of those facilities requires reliable backup power. Cummins already sells the equipment that provides it. It’s pretty much a no-brainer.
If hyperscalers really spend around $750 billion this year, Cummins only needs a small piece of that infrastructure build-out for data centers to become a much bigger part of its business.
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Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Cummins, Meta Platforms, Microsoft, and Oracle. The Motley Fool has a disclosure policy.
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