The U.S. system had 60 million to 80 million distribution transformers in late 2024, and the 2050 need “could increase by up to 260% compared to 2021 levels,” NREL reported. About 55% of residential transformers are near the end of their lives, with many now more than 40 years old, the lab said.

America electric infrastructure is long due for a major revamp.

With the increased penetration of EVs, rapidly expanding datacenters, and higher manufacturing activity, the society is more and more dependent on electricity. It’s not hard to forecast that electricity will eventually replace fossil fuel as the primary energy source. It has lower carbon emissions, lower natural impact, and is more efficient in terms of energy usage. According to WSJ,

Only about 20% of transformer demand can be met by the domestic supply chain, according to Wood Mackenzie, which also estimated that transformer prices have already risen 70% to 100% since January 2020 because of inflation for raw materials such as electrical steel and copper. Wood Mackenzie estimates that transformer prices could increase by an additional 8% to 9%.
Mexico, Canada and China are important sources of electrical equipment to the U.S. In 2024, China accounted for over 32% of U.S. low-voltage transformer equipment imports and Mexico accounted for 36% of high-voltage transformer imports, according to Wood Mackenzie. Canada accounted for about 16% of U.S. imports of high-voltage switchgear and 100% of imported utility poles. Utilities typically go through a lengthy process to test the reliability of transformers they are purchasing and tend to require custom specifications, so it isn’t an easy process to switch to a new supplier, notes Chris Seiple, Wood Mackenzie vice chairman.

Instead of investing directly in fossil fuels or power plants that are more correlated with AI datacenters, a better alternative is to focus on electric power equipment companies, which are less affected by macroeconomic fluctuations and directly benefit from increasing electricity demand.

The optimal investment pathway follows a structured approach:

Power Equipment (Infrastructure & Grid Expansion) → Cloud Computing (Massive Power Consumers) → End Applications (AI, Data Centers, Electrification).

Chinese electrical equipment/parts supplier like Shemar Electric are positioned to benefit from this trend.

The electrical and electrical equipment sector is also the biggest export of China.

Alternative Investment Angles: Power Equipment

The key difference is that power equipment investments are backed by clear and sustained demand growth, whereas chip-related investments involve higher uncertainty due to market cycles and changing industry trends.

This suggests a more stable and defensible strategy in electricity-related infrastructure and equipment, rather than speculative plays on semiconductor narratives.