The US artificial intelligence data center boom is exposing the limits of the power grid. As electricity demand has reached five times the all-time peak, the approval process for new data centers has come to a halt, and a large-scale grid incident has already occurred. With power infrastructure emerging as the biggest bottleneck of the AI era, Korean power equipment makers targeting the North American market are drawing attention as new beneficiaries.
Data Centers Cluster, Power Demand Hits Five Times All-Time Peak
According to the industry on the 6th, the total power capacity requested by projects awaiting grid connection approval from the Electric Reliability Council of Texas (ERCOT) reached 474 gigawatts (GW), about five times ERCOT's all-time peak power demand. There are more than 1,800 projects awaiting approval, of which about 90% are AI data centers.
Texas is emerging as the largest AI data center hub in the US, backed by abundant electricity, ample land and a business-friendly environment. However, as the pace of data center construction has outstripped grid expansion, power supply has emerged as a new bottleneck.
In response, Texas Governor Greg Abbott ordered a temporary suspension of grid connection approvals for new data centers and directed a reexamination of power demand, water usage and ownership structure for all projects. The policy is to reject approval for projects that cannot secure grid stability.
The industry views the measure not as a regulation aimed at curbing AI data center expansion, but rather as a signal to accelerate investment in transmission and distribution infrastructure.
North American Grid Investment Expands, Korean Power Equipment Makers Expect Windfall
As the grid bottleneck becomes reality, forecasts suggest that power infrastructure investment in the US will expand further, including in ultra-high-voltage transmission networks, transformers, GIS (gas-insulated switchgear), switchboards, circuit breakers, cables and BESS (battery energy storage systems).
Accordingly, LS Electric, HD Hyundai Electric and Hyosung Heavy Industries are cited as representative beneficiary companies.
LS Electric is pursuing an expansion of its Utah plant in the US and the construction of a complex hub in Texas with an investment of about 600 billion won. HD Hyundai Electric is accelerating its push into the North American market with 765kV ultra-high-voltage transformers, the highest voltage in the US, and its North American orders in the first half of this year have already reached last year's annual level. It has signed a long-term supply contract worth about 1.1 trillion won with a global big tech company and is in talks for additional supply.
Hyosung Heavy Industries established a joint venture with Quanta Services, the largest power EPC company in the US, and plans to begin production of circuit breakers for GIS from the fourth quarter of this year. It also raised its heavy industry division order target from 8.45 trillion won to 12 trillion won.
The growth of the three Korean companies is also clear. The combined order backlog of LS Electric, HD Hyundai Electric and Hyosung Heavy Industries in the second quarter of this year totaled 36.7254 trillion won, up 53.7% from 23.8881 trillion won a year earlier, a record high. The securities industry believes that, apart from short-term stock price volatility, the mid- to long-term benefits for Korean power equipment makers are likely to continue as long as AI data center expansion and North American grid investment persist.
The securities industry also expects that increased demand for power equipment driven by expanded North American AI data center investment will support mid- to long-term growth. Daishin Securities analyzed that Hyosung Heavy Industries' heavy industry division order guidance for this year was raised from 8.45 trillion won to 12 trillion won, and that its revenue growth forecast was also raised from 15% to 25%. BNK Investment & Securities adjusted its target price for HD Hyundai Electric to 1.1 million won but maintained its 'buy' investment opinion.
In particular, HD Hyundai Electric has signed a long-term supply contract worth about 1.1 trillion won with a global big tech company, and is reportedly in supply talks for additional volume and with three other big tech firms. The securities industry assessed that despite the recent stock price correction, the fundamentals of the power equipment sector are in fact strengthening.
Limits Revealed by an Actual Incident: "Grid Investment Will Accelerate"
There have also been cases where the grid burden has become reality due to the increase in AI data centers. Reuters reported on the 22nd of last month that an incident occurred in the area under the jurisdiction of PJM Interconnection, North America's largest grid operator, in which about 1.5GW of data center power demand simultaneously dropped off the grid.
The incident occurred when voltage fluctuated due to a transmission line fault in the data center cluster in Ashburn, Virginia, in the US, causing data centers to automatically switch to UPS (uninterruptible power supply) and emergency generators.
The industry assesses that the incident demonstrated that in the AI era, securing grid stability and power quality has emerged as a key task, not just expanding power generation. It forecasts that demand for power equipment such as ultra-high-voltage transformers, GIS, circuit breakers, switchboards and BESS will expand beyond conventional transmission network expansion, centered on grid stabilization equipment.
In particular, the US has expanded investment in replacing aging power grids since the Texas cold snap in 2021, and this incident is expected to further accelerate grid stabilization investment linked to data centers. PJM has also begun overhauling relevant systems, approving a plan in January this year to stably connect large-scale data centers to the grid. The industry believes that investment to enhance grid stability and power quality, beyond expanding transmission capacity, will begin in earnest.
