Maintain our Machinery views: Power over Precision, Miners over Farmers

Research evidence excerpt

Maintain our Machinery views: Power over Precision, Miners over Farmers

the COVID-era supply chain disruptions (including early

purchasing, supplier diversification, and alternative sourcing) to mitigate cost

volatility. Looking ahead, PCL believes any meaningful decline in interest rates

would be a significant positive catalyst for private non-residential construction

activity, while further increases in borrowing costs would create additional pressure

on project economics and development activity.

• Power: Power infrastructure has increasingly become an integral component of

large-scale data center developments. PCL indicated that modern data centers are

no longer major water consumers because many employ closed-loop cooling

systems that recycle water, reducing strain on local water resources. However, the

facilities remain extraordinarily power intensive. As a result, many data center

developments now require associated investments in power generation,

transmission infrastructure, and substations before campuses can be energized. PCL

noted that concerns around electricity demand and utility costs are prompting some

jurisdictions to require developers to provide their own generation capacity, leading

to power plants being built alongside hyperscale campuses. PCL views this as a

significant opportunity given that its industrial division also builds power generation

facilities. PCL also identified transformers, switchgear and other major electrical

equipment as the most constrained parts of the supply chain, with lead times

extending into years, prompting hyperscale customers to procure and warehouse

equipment well ahead of construction.

• Water infrastructure: Water infrastructure was highlighted as one of PCL's

strongest end markets.