No end in sight: How the data center boom is reshaping the industrial ecosystem

This article was originally published on RSM US.

Major hyperscaler cloud service providers have announced an eye-watering level of capital expenditures in recent years amid the data center boom. Capex investments from the five leading companies in this space peaked at $379 billion in 2025, according to their Form 10-K filings with the U.S. Securities and Exchange Commission. As of this writing, estimates in public filings show these companies' capex could exceed $725 billion in 2026.

This spending accelerated following OpenAI’s launch of ChatGPT in November 2022, benefiting the technology sector, especially companies focused on advanced microchips and servers. But plenty of hyperscalers’ capital spending has also gone to the industrial sector to build the infrastructure required to power, cool, protect and manage the silicon in data centers.

Such investment, while positive, is adding demand pressure to the industrial ecosystem. Delivery timelines for specialized data center infrastructure have lengthened; power infrastructure is another significant bottleneck, with power transformers and switchgear facing lead times of three to five years. The lead time is 72 to 96 weeks for generators, 18 to 36 months for smaller gas turbines and up to five years for large turbines. The industrial supply base has responded with its own investment to build additional capacity, boost productivity and improve processes to meet delivery expectations.

More than generating demand, delivering against it in a constrained environment will be one of the biggest challenges for industrial companies. Businesses will need to plan carefully for sustained demand—expected to last at least into 2028—and invest in capacity, workforce and supplier relationships that can support multiyear lead times.

Capex in the industrial space

To put the industrial investment into perspective, an analysis of public company filings, earnings calls and institutional investor research indicates about 40% to 50% of data center capex goes to industrial infrastructure. These investments focus on the infrastructure required to power, protect and cool high-performance chips running artificial intelligence workloads within data centers. Key components include electrical equipment, on-site and backup power generation, transmission and distribution systems, switchgear, cooling systems, and associated engineering design and construction costs.

Order backlogs from major electric power and distribution equipment makers shed light on the impacts of the demand spike.

There is a massive downstream impact on companies that supply these industrial giants, from direct suppliers to further down the chain. Leading companies in this space rely on a massive ecosystem of businesses in the small, middle and upper segments of the middle market that must also invest in capacity, business processes and technology to meet demand, creating a ripple effect that is transforming the industrial sector.

One result is that industrial companies are increasing their own capital spending, following the pattern of hyperscalers’ technology investment.

Middle market electric power and distribution suppliers to these giants are mirroring capex investments to scale their operations and transform their businesses

Various engineering and construction companies that serve the data center ecosystem are also feeling the effects of the demand spike.

Energy infrastructure company Quanta Services’ backlog went from $7.9 billion in 2019 to $44 billion in 2025, a more than fivefold increase. Engineering and construction company Comfort Systems USA’s backlog went from $1.6 billion to $11.9 billion in that same time frame, a more than sevenfold increase.

These examples represent continued strong demand for data center electrification for the next 12 to 18 months. Not all companies report what proportion of their increased backlog is related to data center and AI exposure, but for those that do, the figure reaches as high as 80%.

Notably, not all capacity increases have come from the capex channel. Acquisitions also increase capacity. Quanta Services has made at least five acquisitions since 2023. Comfort Systems has made five key acquisitions since 2023 plus many smaller ones since 2021. Fluor has divested several businesses to strengthen its balance sheet and focus on energy transition businesses and high-tech manufacturing, but it remains a significant player in the data center economy. Much like Eaton, ABB and Schneider, the broader industrial sector has benefited from the ripple effects of these multiyear orders, which have spurred capex investment to boost production volumes.

The outlook: Delayed timelines and continued investment

As data center construction and electrification remain priority investments for hyperscalers, demand for power, cooling and supporting infrastructure is likely to stay elevated into 2030, barring significant economic or industry-related shocks.

The pressure to deliver on time is high. Delays can erode margins across the value chain, with consequences ranging from liquidated damages and back charges to higher labor, logistics and reputational risks—reinforcing the need for industrial companies to evolve their operating models to support longer planning horizons, tighter coordination and higher execution standards.

For many middle market manufacturers, suppliers and contractors, the path forward will hinge less on chasing incremental volume and more on building resilience, predictability and scalability into their businesses. Companies that adapt early will be better positioned to meet customer expectations, protect margins and participate more fully in this next phase of industrial investment.

Industrial companies may want to consider the following actions as they navigate this environment:

• Plan for sustained demand, not a short term surge: Reassess capital allocation, workforce planning and facility expansion with multiyear demand visibility in mind rather than assuming a cyclical pullback.
• Invest in operational efficiency alongside capacity: Process improvements, automation and reduced non-value-added time can often unlock throughput faster and at lower risk than adding physical capacity alone.
• Strengthen supply chain transparency and coordination: Greater data sharing with key suppliers and customers can help anticipate constraints earlier, reduce surprises and shorten order to delivery cycles.
• Enhance cost and margin visibility: Improved analytics around pricing, labor, materials and project execution can help companies manage volatility and protect profitability in long-duration contracts.
• Build flexibility into contracts and project planning: Tighter escalation clauses, along with clearer estimates of lead times and delivery risk, can reduce exposure as timelines continue to stretch.

These steps can help industrial companies move from reacting to constraints toward operating confidently within them, positioning themselves as reliable partners in an ecosystem reshaped by the data center boom.