Al Root

Schneider Electric and Nvidia announced plans Tuesday to create "digital twins" of power-hungry artificial intelligence data centers to help manage electricity efficiently.

The electric system hardware provider and the chip maker said virtual representations of data centers will permit improved designs to better manage power use. The AI revolution and its extreme demands on data centers have pushed up electrical consumption.

Creating a "virtual replica of a data center's electrical infrastructure" helps improve operations, cutting power demand. Integrating AI into the building process also means AI technology itself helps design efficient operations, explains Pankaj Sharma, a Schneider's executive vice president.

Partnerships with Nvidia expand Schenider's data center footprint. So does the recently closed acquisition of liquid cooling technology provider Motivair.

Data center growth expectations wobbled after the January emergence of the Chinese AI application DeepSeek, which was allegedly created for a fraction of what Alphabet, Meta Platforms, OpenAI, and others spend developing their AI applications.

DeepSeek created the concern that maybe useful AI applications didn't required hundreds of billions of dollars in data center infrastructure. "Volatility in this market is something we're all seeing," said Sharma.

The future still looks bright though. Capital spending at Alphabet, Amazon, Meta Platforms, and Microsoft is expected to exceed $300 billion in 2025, up more than 30% year over year.

More AI spending is one reason Barron's wrote positively about Schneider stock in late October. Coming into Tuesday trading, Schneider stock was down about 4% since the article appeared. The S&P 500 had fallen about 2%.

DeepSeek's impact on invest sentiment appear to be the main reason, and Schneider stock has escaped relatively unscathed. Shares of peer Eaton were down 14%.

Declines have left both stocks trading for about 24 times estimated 2025 earnings. A year ago, Schneider traded for closer to 26 times. Eaton traded for closer to 29 times. The S&P 500 trades for closer to 21 times.

Eaton and Schneider both are expected to grow earnings faster than the S&P 500 for the next couple of years, according to Wall Street's consensus estimates. Eaton and Schneider should grow earnings between 12% and 13% a year. S&P 500 earnings growth is expected to be closer to 10% to 11%.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 18, 2025 16:00 ET (20:00 GMT)

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