Tech giants are going all-in on AI infrastructure, pouring billions into next-gen data centers despite macroeconomic and geopolitical headwinds. Microsoft, Meta, and Alphabet alone plan to spend over $225 billion on capex in 2025. One quiet yet critical player poised to ride this wave is Emcor. In today’s FA Alpha Daily, we explore why this engineering firm could be an under-the-radar winner in the AI data center boom.
FA Alpha Daily
Powered by Valens Research
Despite concerns about overspending on artificial intelligence infrastructure, economic instability, and the potential trade war, companies are pressing ahead with significant investments in data centers.
Microsoft (MSFT) has announced its plans to invest $80 billion in data centers during its fiscal year 2025.
The investment will focus on expanding the infrastructure needed to handle the massive computing power AI demands.
Microsoft’s Vice President Brad Smith explained that this level of spending is necessary to support AI advancements, as the technology requires specialized, large-scale data centers to function effectively.
Furthermore, Meta (META) said it will spend $72 billion on capex in 2025, up sharply from the $60-65 billion it forecast three months ago and more than double its 2023 spend.
Alphabet (GOOGL) also reaffirmed its plans to spend $75 billion in capex this year as it pushes forward in the AI race.
One company set to benefit from this trend is Emcor (EME), an engineering and construction firm.
The company offers a wide array of services crucial for modern infrastructure, including heating, ventilation, and air conditioning (HVAC), electrical systems, plumbing, fire protection, building automation, and ongoing facilities maintenance.
A key area poised for substantial growth, and one from which Emcor could significantly benefit, is the increased infrastructure spending directed towards data centers.
These projects approach nearly 30% of the company’s remaining performance obligations (RPOs).
With global data center spending projected to grow at a CAGR of 11% from 2025 to 2030, Emcor is well-positioned to provide the essential construction services for these facilities, which have increased power and cooling requirements.
The expansion in AI data centers is still in its early stages…
There is also a corresponding need for more natural gas power plants to support and stabilize the electrical grid, not only for data centers but also for other industrial facilities, potentially driving further long-term growth.
Furthermore, Emcor also pursues growth through a vigorous acquisition strategy.
In 2024, the company completed seven acquisitions totaling $230 million, aiming to build its business and enhance its service offerings to meet customer demand.
A significant recent move was the $865 million acquisition of Miller in February 2025. This acquisition is expected to increase Emcor’s presence in high-growth sectors and expand its electrical capabilities.
All these factors combined enabled the company to achieve 30% Uniform return on assets ”ROA” and 20% asset growth last year.
Since the start of the pandemic in 2020, Emcor has managed to double its ROA with the increasing AI tailwinds, which are getting stronger and stronger every year following 2023.
However, the market currently expects AI and data spending to fade and the company’s profitability to decline.
We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.
The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.
In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.
At the current stock price, the market predicts that the company’s Uniform ROA to decline to 26% from 30% last year.
These expectations are in contrast with Street’s expectations of ROA climbing towards 40% in the next few years.
As data center investments accelerate, the services Emcor offers should be in high demand.
Furthermore, with no pressing maturities on its long-term borrowings and a track record of free-cash-flow generation, the company can fund both organic growth initiatives and future acquisitions without stretching its financial flexibility.
As the world continues to invest more in AI, contractors capable of executing large-scale electrical and mechanical projects will become ever more valuable partners, and Emcor appears to be among the first in line.
Best regards,
Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research
Today’s analysis highlights the same insights we share with our FA Alpha Members. If you want to an get in-depth analysis of market trends and uncover undervalued stocks, become an FA Alpha Member today.