Bank of America has lifted its price target for Legrand, the French electrical-equipment maker, to €138 from €121, even as it maintained an underperform rating on the stock. The move reflects the bank's view that data center spending remains robust, but it also underscores a persistent concern: Legrand is still not as well positioned to capture the boom as some of its rivals.
What's driving the data center demand?
The world's biggest technology companies and cloud providers are pouring billions into new data centers to support artificial intelligence and cloud computing. That has created a surge in demand for the electrical gear that powers and cools these facilities—everything from switchgear and power distribution units to cooling systems and cabling.
BofA points to strong order growth at two of Legrand's competitors as evidence of the trend. ABB's Electrification unit and Schneider Electric's Energy Management business, both major suppliers of power equipment for data centers, have reported triple-digit order growth. That suggests the market is expanding quickly, and companies with a direct line into data center construction are reaping the benefits.
Why Legrand is seen as lagging
Legrand makes a wide range of electrical products, including sockets, switches, and wiring devices, as well as more specialized gear for buildings and infrastructure. But the company discloses relatively little about how much of its revenue comes from data centers, making it harder for investors to gauge its exposure.
More importantly, Legrand's products tend to have short lead times—roughly six to ten weeks—which means its sales typically show up late in a project, only a few months before a data center goes live. In contrast, rivals like ABB and Schneider often supply large, custom-built systems that are ordered early and booked well in advance. That difference in timing means Legrand may miss out on the initial wave of orders that flow to companies with longer-cycle products.
As a result, BofA argues that while Legrand will benefit from the overall growth in data center construction, it is likely to capture a smaller share of the opportunity than its more specialized competitors.
What this means for investors
For everyday investors, the key takeaway is that not all companies benefit equally from a major trend like data center spending. Even in a fast-growing market, some firms are better positioned than others based on their product mix, customer relationships, and how quickly they can convert orders into revenue.
Legrand's underperform rating suggests BofA believes the stock may not deliver returns as strong as its peers in the sector. The raised price target, however, indicates the bank still sees some upside from current levels, just not enough to justify a more favorable rating.
Investors should also consider the broader context. Data center construction is a multi-year trend, but it is not without risks. Rising interest rates, concerns about overcapacity, and the heavy debt loads taken on by some data center developers could slow the pace of new projects. As Oracle's earnings showed, the balance between cloud growth and data center debt is a delicate one.
Still, the appetite for AI infrastructure shows no signs of abating. Recent moves like Google's €13 billion investment in Finland and Zankore's $3.1 billion loan for Nvidia-powered data centers highlight the scale of capital being deployed. For companies like Legrand, the question is whether they can adapt their product offerings and supply chains to capture a larger slice of that spending.
What to watch next
Investors will be watching Legrand's quarterly earnings for any signs that data center orders are starting to flow through. The company's management has been cautious in the past about quantifying its exposure, but any change in that stance could shift sentiment.
Also worth monitoring is the pace of data center construction globally. If projects continue to ramp up, even a laggard like Legrand could see a meaningful boost to sales. Conversely, if the market cools, the company's shorter lead times might actually be an advantage, allowing it to adjust more quickly than rivals with longer order books.
For now, BofA's stance is a reminder that in the data center gold rush, the picks and shovels are not all created equal. Investors should look beyond the headline trend and consider which companies are truly best positioned to profit from it.
