Bank of America has identified a new under-the-radar AI data center play

Generac is positioned for substantial growth in the data center market, identified by Bank of America as its most significant opportunity in decades, driven by a projected 5,000-unit backup generator deficit in the tech sector by 2026. Bank of America raised Generac's price target to $221, citing the company's existing $150 million backlog with shipments ramping in H2 2025, and forecasting data center revenue to reach $350 million in 2026 and $500 million in 2027. The news propelled Generac shares up 6%, highlighting the company's role in addressing a critical bottleneck for ongoing data center expansion.

Analysis

Bank of America has identified Generac's entry into the data center market as a significant, multi-year growth inflection, describing it as the company's most impactful opportunity in decades. This thesis is supported by a projected 5,000-unit backup generator deficit within the tech sector by 2026, a critical bottleneck for data center expansion that tech companies are urgently addressing. Generac has already gained commercial traction, securing a $150 million order backlog with shipments expected to ramp up in the second half of 2025. Bank of America's financial model reflects this optimism, forecasting Generac's data center revenue to reach $350 million in 2026 and $500 million by 2027, leading to a price target increase to $221. The market has responded positively, with shares rising approximately 6% on the news, signaling investor confidence in this new growth narrative.

Key Decisions for Investors

• Investors should view Generac's strategic entry into the data center market as a validated, long-term growth catalyst, given the confirmed $150 million backlog and strong industry demand.
• It is critical to monitor Generac's execution by tracking the bookings cadence, the number of hyperscaler clients it secures, and management's plans for capacity investment to meet demand beyond 2027.
• Considering that significant revenue shipments are projected to begin in the second half of 2025, investors should adopt a medium-to-long-term perspective, as the full financial benefits of this opportunity are not immediate.