The data center market seemingly changes on a daily basis. There are new data center construction announcements. The hyperscalers announce new partnerships. There is new technology designed to support the latest platforms and unleash more capabilities. And there is a ton of money chasing the entire sector.

Data Centers Have Transformed Distribution

From a channel perspective, distributors are pursuing the business with large companies being beneficiaries of the largest segments of the business (if they are placed via distribution) due to their scale and ability to handle the order, credit-wise) but there are opportunities for many other medium-large regional distributors to earn “discretionary / localized” business that supports the onsite contractors. Some decisions are made by EPCs. Some by contractors.

From a services side, distributors are operating job-site trailers, VMI storerooms, pop-up branches, and calling on remote contractors.

And last week I was on a call with individuals within the data center ecosystem and 50% of the conversation was about product availability (switchgear and transformers were mentioned repeatedly) with the other 50% being a mix of power generation challenges (and behind the grid) as well as community opposition.

But this segment is critical to the electrical channel, even if “we” only participate in a nominal segment of the spend (and Kevin Coleman shared more on this recently and in our Data Center report) and it’s integral to the macroeconomic environment.

The latest DISC Flash report shared that “The U.S. data center electrical equipment market is projected to grow from ~$20 billion in 2025 to $65 billion by 2030.” This is from OEMs, which is a different opportunity for distributors as much of this finished goods material will not flow through distribution.

This is a segment of the industry where product development / product innovation is frequent due to the development of the next generation of data center drivers, GPUs and essentially anything / everything coming from Nvidia.

And remember, there is significant electrical spend within a data center that is sold direct by switchgear and transformer companies (along with other product categories.

Enphase Energy and Solid-State Transformers

Last week I saw this story on a new product category (and I’ve edited it a little because it came from SeekingAlpha, which focuses more on financial investments):

Enphase Energy’s stock was up last week a day after Goldman Sachs issued a report discussing solid-state transformers and the company’s ability to take advantage.

With the pending evolution of modern data centers to 800V DC architecture per the Nvidia roadmap in coming years, Goldman analyst Brian Lee noted the opportunity for power conversion technology across the AI data center footprint that is beginning to come into focus, as several technology firms are planning to roll out advanced transformer technologies to address the efficiency, reliability, and higher power needs of future AI data centers.

“The roadmap to transition to 800V DC indicates first deployments starting as early as 2028, and this has set off a race to commercialize” solid-state transformers, Lee wrote, with power inverter suppliers Enphase and SolarEdge already indicating plans to roll out product demos by the end of this year, while industry participants such as ABB, GE Vernova, and Siemens also appear to be targeting solutions for the opportunity.

Lee estimated the total SST addressable market at ~10 GW in 2030, equating to a revenue opportunity as high as $5B; based on low and high scenarios.”

Take Away

• If you are pursuing / serving the data center market, staying up on product is key.
• Notice the companies? Do you / will you / can you have access to them? In reality, for many of them, no because they are going to sell direct. Possibly because it is a very technical sale. Possibly because they already have another channel.
• Solid-state transformers. Is this a product category, and application, that you should be asking your transformer / switchgear manufacturer(s) about?

We’ve had manufacturers, and distributors, ask “when do you think the data center opportunity will end / slowdown?” While the growth rate may slow, there is significant demand, much backlog, and more development and funding in the pipeline. The application for data centers, defined as storage of digital information, let alone AI utilization, is not going to slow. If anything, it will accelerate (quantum computing, robotics, autonomous driving, credit card usage, web usage, video, AI – new users and increased usage, let alone enterprise usage, military applications, and other more.) The information needs to be stored somewhere. There will be more datacenters (even with the NIMBY mentality.) Will construction of buildings slow … maybe. Will the interior of existing building need to be continuously upgraded … yes. Think of this as the MRO equivalent of an industrial facility. The electronics will change. Will the electrical industry participate in this … nominally, unless you’re Wesco, Graybar, maybe Rexel’s Talley business, and a few others. It’s a different segment … electronics. And some is direct sales.

Here’s an interesting article / white paper from Goldman Sachs titled “Tracking Trillions: The Assumptions Shaping the Scale of the AI Build-Out.”

While the channel focuses on the construction of data centers (the physical “box” around the computers, chips, et al) think about the power generation opportunity. Is this destined for direct sales, Wesco, Graybar, Sonepar / Irby, Border States and other specialists? And if you are an independent manufacturer rep, have you thought about the utility rep market?

And yes, not all distributors can, and should, pursue this segment. Know your strengths. Know your customers. Focus on supporting them. Some will take you to data centers. Some will take you to business that those pursuing data centers overlook.

If we can help you unlock opportunities so that your non-data center customers / business grows, give us a call.