Generac Soars As Amazon Power Deal Ignites AI Hopes

Big Tech companies are facing challenges in securing reliable electricity for their expanding AI infrastructure, with demand projected to surge over 1,100% by 2033. Companies like Amazon, Meta, and Oracle are investing heavily in data centers and power infrastructure, while also committing to cover grid-upgrade costs. Oracle's Project Jupiter highlights financial risks due to power-delivery delays. Amazon and Meta are spending on backup generation and new power plants, respectively.

UBS reiterated a Buy rating and $340 price target on Generac (GNRC) after its long-term supply agreement with Amazon, valued at up to $8 billion. GNRC shares trade at $198.05, below their 52-week high. UBS adjusted its EBITDA estimates, citing data center growth and reduced residential/commercial growth forecasts due to higher interest rates.

Amazon and Generac agreed on a long-term supply deal for backup generators, with Generac expecting $2.4B in deliveries by 2028 and up to $8B in total. Amazon gained a warrant for 1.69M Generac shares. Generac's shares surged 18% post-announcement. The deal highlights Amazon's strategy to secure critical infrastructure for AI data centers.

Generac Holdings (GNRC) signed a $2.4B supply deal with Amazon for data center backup generators, boosting its data center business. Cantor Fitzgerald maintained an Overweight rating and $333 price target. The deal increases revenue visibility but carries risks like customer concentration and execution challenges.

Generac (GNRC) shares rose after signing an $8B deal with Amazon (AMZN) to supply generators for data centers, including a warrant for Amazon to acquire a stake. The deal positions Generac as an AI-related stock, with projected 2023 revenue of $5B. Shares had faced pressure due to China-sourced parts and U.S. grid equipment bans, though Generac's products are not directly affected.

Generac reported Q2 net sales of $1.17B, up 11% YoY, with adjusted EPS of $2.91, up 76.4% YoY. The company secured a $700M deal with a hyperscale data center operator for 2027. Analysts expect EPS growth of 54.3% YoY for the current year and 17.5% for the next year. Analysts from Cantor Fitzgerald, Needham, and Canaccord Genuity maintained or raised price targets and ratings.