Allspring Growth Fund Q1 2026 Contributors And Detractors

Comfort Systems USA entered 2026 with a robust backlog and high revenue visibility, aided by increased adoption of modular offsite solutions. Vertiv saw a sharp acceleration in order growth and continued share gains in cooling, while Quanta Services posted a strong earnings beat and record backlog as power infrastructure demand surged alongside AI build-out.

Analysis

This read-through is really about capacity scarcity moving one level deeper in the AI stack: not just chips and data centers, but the electrical, thermal, and mechanical plumbing that turns capex plans into live compute. The common denominator across all three names is that backlog is becoming more valuable than near-term revenue because it extends visibility into a market where lead times, permitting, and specialized labor are still the binding constraints. That favors contractors and infrastructure vendors with execution credibility and modularization advantages, while punishing legacy incumbents that still rely on slower, less standardized delivery models.

Second-order, the setup suggests margin durability may be better than the market assumes. If modular/offsite methods keep gaining share, these companies can protect pricing even as competitors try to catch up, because the real moat is not fabrication alone but integration, field installation, and program management capacity. The biggest spillover is negative for smaller regional contractors and traditional HVAC/cooling suppliers that lack the balance sheet or scale to prebuild inventory and secure long-dated project slots.

The risk is that this becomes a sentiment-driven backlog trade before becoming an earnings trade. If AI-related capex pauses for even one quarter, order growth could decelerate sharply and multiples could compress first, especially in the higher-beta name with the most “AI infrastructure” premium embedded. Over a 6-12 month horizon, the key question is whether these firms can convert backlog into working capital-efficient cash flow fast enough to justify re-rating, or whether execution bottlenecks and labor inflation eat into the apparent upside.

Consensus still seems to underappreciate how long the bottleneck can persist: power and cooling constraints usually resolve slower than headlines imply, which means the revenue stream can stay elevated for multiple budget cycles if AI build-out remains disciplined. The contrarian risk is that investors are extrapolating a straight line from backlog to FCF; if project mix shifts toward more bespoke work or working capital intensity rises, the market may need to reprice the quality of growth rather than the quantity.

Key Decisions for Investors

• Long PWR vs short a basket of industrial contractors with less AI/power exposure for the next 3-6 months; thesis is backlog durability and pricing power versus more cyclical end markets, with a cleaner earnings revision profile.
• Add to FIX on any 5-8% pullback after results; use a 6-9 month horizon and target a rerating if modular adoption continues, but size modestly because the stock is vulnerable to any slowdown in AI-related project awards.
• Stay long VRT but hedge with upside calls financed by selling near-dated calls into strength; the stock should benefit from order-book acceleration, but the multiple is the most exposed to any normalization in growth expectations.
• Pair PWR long against a short in a legacy electrical/HVAC peer basket over 1-2 quarters; the spread should widen if power bottlenecks keep extending and the market continues rewarding backlog visibility over simple revenue growth.
• Trim or take partial profits into any sharp post-earnings move across the group; these names may be priced for a multi-quarter scarcity regime, so the asymmetric risk is a disappointment in conversion, not a lack of demand.