Hyperscalers are on track to pour $750 billion into AI infrastructure this year, and the scramble for reliable electricity has turned a century-old diesel-engine maker into a quiet beneficiary of the build-out. Cummins, long written off as a relic of the internal-combustion era, is selling the backup and prime-power generators that keep data centers running when the grid cannot.
The grid cannot keep up
The sheer scale of new data-center capacity is straining utility connections faster than they can be built. SpaceX resorted to constructing its own natural-gas plant to feed the Colossus I and Colossus II facilities, a pattern repeating across the industry. Cummins slots into that gap with generator sets that can be deployed in weeks rather than the years a grid upgrade requires.
Power systems outpace the core engine business
Revenue in the power systems segment rose 19 percent in the June quarter compared with the same period a year earlier, while the traditional engine business grew 6 percent. The division has supplied off-grid power to mining and remote operations for decades, so the technology is not new, only the customer base is.
Valuation prices in the narrative
The market has noticed. Cummins trades at 30 times earnings, well above its five-year average of 17.5 times. The Motley Fool’s Stock Advisor service left the name off its latest list of ten best ideas, a signal that some stock-pickers see the AI premium as already baked in.
Watch the prime-power pivot
Management says it is pushing beyond backup units into always-on prime power, targeting data centers that will never get a firm grid connection. If that shift accelerates, the revenue mix could tilt further toward the higher-margin power systems line, but at 30 times earnings, the stock leaves little room for execution slips.