Data centre-linked industrial stocks lose $4.2tn as AI trade reverses

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Data centre stocks lose $4.2tn

Highlights

Industrial stocks linked to data centre construction lost $4.2tn in market value since June as the AI trade rapidly unwinds.
Caterpillar lost $214bn in market cap and 44 percent off its high, while Oklo, Comfort Systems, and Corning each saw drops of about 49-50 percent.
Despite the sell-off, U.S. data centre construction spending hit $96bn to September and Caterpillar reports a record $78bn backlog with 75 percent growth in power sales.

Sell-off hits suppliers across power and equipment

As reported by the Financial Times, companies most closely associated with data centre construction through media coverage are suffering the steepest declines as investors reassess the AI "picks and shovels" trade.

Caterpillar, a key supplier of gas generators to data centres, has lost $214bn in market capitalisation, or 44 per cent, since its shares reached a record high on June 30, according to FactSet data. Nuclear power company Oklo has fallen 49 per cent despite signing a contract with Meta in January, while Comfort Systems and fibre optics maker Corning have each lost about half of their value over the same period.

Paul Kedrosky, a venture capitalist and fellow at the MIT Institute, said investors had been wrong to value traditional industrial companies like semiconductor stocks. Brett Ryan, senior U.S. economist at Deutsche Bank, said institutional money had piled into the trade too aggressively, pushing valuations to overly enthusiastic levels as equity markets catch up with credit market concerns over risky financing for data centre construction.

Demand outlook remains firm despite market volatility

In the first six months of 2026, investors piled into industrial and energy stocks linked to data centres, but that trend has swung sharply into reverse since June as concerns mount over debt-funded capital spending by hyperscalers and political opposition to new facilities in the U.S. The industrial sector is now the second-worst performer in the S&P 500 since the summer, behind technology.

Even so, some analysts and executives argue the operating backdrop remains strong. U.S. spending on data centre construction, excluding IT equipment and chips, reaches $96bn in the 12 months to September, according to the latest government data, and Alex Cordovil of Dell'Oro Group said revenue and earnings prospects remain robust because demand still far exceeds supply.

Corporate order books also continue to show strength. Allient chief executive Richard S Warzala said on a November 5 earnings call that data centres already under construction still need to be completed, while Caterpillar reports a record $78bn backlog and 75 per cent year-on-year growth in power generation sales driven by data centre demand. Siemens says orders for electrical equipment from data centres rise 60 per cent in 2026 to €7bn, and Eaton reports that orders have doubled from a year earlier.

Kedrosky cautioned that backlogs and orders are trailing indicators and may reflect double or triple ordering by buyers trying to secure scarce capacity. Citi researchers say after this month's midterm elections that tighter regulation could increase volatility for the data centre industry, although broad restrictions on construction remain unlikely.

Previously, we highlighted the AI stocks selloff as Nvidia leadership turmoil stoked fresh worries about sector financing.

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