Top Machinery & Electricals Stocks Amid Data Center Political Risks

 Bernstein analysts identified key machinery and electrical stocks to buy as midterm elections influence data center construction across the United States. While political opposition to data centers may be rising, the economic incentive to continue building remains strong, according to the firm's latest research.

The analysis examined how state and local government elections impact data center development, with 36 gubernatorial and 15 Public Utility Commissioner seats up for election. These races could affect 305 gigawatts, or 70% of the data center project pipeline.

Of the approximately 430 gigawatts of data center projects in the pipeline, roughly 250 gigawatts or 60% reside in states where the front-runner for governor favors greater restrictions on data center construction.

However, Bernstein noted that elected officials face powerful economic incentives to moderate opposition once in office. Data center projects represent 8% of state GDP, with 3% flowing to craft labor wages in local economies. The outcome will likely focus on changing who pays for infrastructure rather than curtailing growth entirely. Governments may force developers to shoulder a greater share of grid and power infrastructure costs, but the incremental cost to developers remains immaterial.

With prediction markets pointing to victories for candidates favoring restrictions, Bernstein expects selling pressure in the immediate aftermath. However, with AI industrials already in a bear market and strong incentives for politicians to moderate their stances, the market may have overshot on political risk concerns.

Here are Bernstein's top machinery and electricals stock picks:

1. Quanta Services (PWR) - The firm's top pick in the machinery and electricals sector amid the evolving data center construction landscape.

2. Eaton (ETN) - Ranked as the second-best opportunity in the sector as political risks surrounding data center development remain elevated.

3. Forgent Power Solutions (FPS) - The third-ranked stock in machinery and electricals as investors navigate midterm election outcomes.

4. Legence (LGN) - Rounds out Bernstein's top four picks in the sector despite approximately 244 gigawatts or 55% of the pipeline facing political risk following the 2026 midterms.