Should I Buy Eaton Corporation (ETN)? Finance YouTuber Analysis

The YouTuber suggests Eaton as a 'picks and shovels' play for data center infrastructure, as it provides the electrical backbone regardless of the power source. They emphasize its strong demand, evidenced by a $14 billion backlog and 240% growth in data center orders, and its innovation in 800-volt power systems and liquid cooling, leading to doubled EPS and rising margins.

“What makes it a true picks and shovels play is that it simply does not matter whether the electricity comes from a gas turbine, a fuel cell, or the grid because all of it has to run through Eaton's equipment to even reach the servers.”

The YouTuber recommends buying Eaton, a power management company, due to its critical role in AI data center infrastructure. He highlights its significant electrical content per megawatt of AI compute, leading to a market opportunity larger than its annual revenue. Strong data center order growth (240%) and a substantial backlog indicate robust demand, while improved operating margins and a successful business transformation further support the investment thesis.

“And a pullback, like the one that we just got, is the window to start building the position.”

The YouTuber recommends Eaton Corporation, a major supplier of power management equipment for data centers. The company reported over 200% year-over-year growth in total data center orders and a record $13.2 billion backlog in its Electrical Americas segment, representing over a decade of normalized build rates. Its acquisition of Boyd, a liquid cooling company, further strengthens its position in the growing data center market.

“Management has noted that data center construction backlog represents over a decade of normalized build rates.”

The YouTuber recommends Eaton Corporation because it owns the entire supply chain for critical electrical infrastructure like transformers and power distribution units, which are causing significant delays in data center builds. Eaton captures substantial revenue per megawatt of data center capacity, has a massive backlog, and has demonstrated strong growth in EPS, free cash flow, and operating margins, with further expansion targeted.

“Eaton happens to own the full chain that solves this problem. They've got the transformers, the switchgear, power distribution units, and the busway that moves electricity from the grid to every server rack that's inside.”

The YouTuber suggests Eaton as a key player in the 'cooling and electrical infrastructure' layer, noting that the heat problem scales with every new data center. He argues that companies like Eaton, which are doing essential infrastructure work in this area, are currently undervalued by most investors.

“Bottleneck six is cooling. Verv ticker VRT, Schneider Electric, and Eden are doing real infrastructure work here that most investors haven't started pricing correctly.”

The YouTuber identifies Eaton as a secondary anchor for the AI power theme, providing exposure to the electrical side of the system. Eaton helps move power through the necessary architecture for AI deployment, which becomes increasingly important as AI buildouts require more physical infrastructure.

“Eaton matters for a different but related reason. It gives you exposure to the electrical side of the system that helps move power where it needs to go.”

The YouTuber recommends avoiding Eaton due to its high P/E of 37 (28 forward) despite a modest 10-year revenue growth rate of 2.8%. He acknowledges recent tailwinds from AI buildout but warns that this growth is unsustainable. He anticipates that AI capex growth will likely slow or turn negative, leading to headwinds for Eaton and a high risk of both operational decline and multiple compression.

“So paying 37 times earnings brings a lot of risk because not only can operations go negative in the next few years maybe when tailwinds become headwinds but also multiples can compress at the same time.”