Barclays warns AI data center equipment boom is peaking

Barclays ↘ 1.49% analysts say the companies that supply power and electrical equipment to AI data centers are at growing risk of a pricing squeeze from the largest artificial intelligence labs. They argue that the boom in these suppliers' fortunes is close to its peak. The warning, reported by Bloomberg on Tuesday, October 20, names Siemens Energy, ABB and Schneider Electric. All three have earned strong returns building the electrical links that carry grid power to AI servers.bloomberg.com

The note came as investors were already questioning how long AI spending can last. It shifts the focus from how much these companies can sell to how much they will be able to charge.

Capacity and pricing power

Barclays' main worry is that suppliers adding production capacity could lose pricing power, which would put future margins under pressure even while orders stay strong, TokenPost reported. That report said the assessment also covered Siemens.tokenpost.com

The bank has struck this tone before. In July, it cut Siemens Energy to "underweight," saying the company's market value was "pricing in indefinite peak-cycle economics," according to Investing.com. It also noted that major turbine makers had already locked in more than 70 gigawatts of data-center orders or production-slot reservations. Barclays said that volume covers about three to four years of demand. Separately, it estimated that the market for full-scope data center electrical equipment would peak at $140 billion in 2028, Investing.com reported.investing.com+1

Record orders, falling shares

The companies' latest results show no slowdown so far. On October 20, ABB reported record third-quarter orders of $12.06 billion, up 40%, with data center orders more than doubling. "We see absolutely no slowdown, more of an acceleration in our numbers," CEO Morten Wierod said, according to Bloomberg.bloomberg.com+1

ABB's shares still fell nearly 6% that day, as nervousness about AI investment weighed on the sector, Reuters reported. Analysts cited concerns about high valuations and how the AI build-out is being financed. Net income also missed forecasts because of a non-cash hedging charge tied to ABB's pending Rotork acquisition.live.euronext.com+1

Four days earlier, on October 16, Schneider Electric raised its 2026 targets for the second time this year. Third-quarter revenue hit a record €11.46 billion, and data center demand grew at a triple-digit rate. The company said continued pricing momentum would offset raw-material inflation and tariffs for the year, according to Dow Jones.reuters.com+1

A test of leverage

The real question is who will hold the bargaining power once supply catches up with demand. Schneider CEO Olivier Blum said his company is "extremely careful to select those companies that will be there in the long term" among its data center customers, Utility Dive reported. Citigroup's Martin Wilkie said ABB's strong orders point to further upside in 2027 and 2028. But he added that an improvement in sentiment on the broader AI theme is needed "to drive the shares higher".swissinfo.ch+1