The United States is in the midst of a transformer supercycle driven by the trifecta of power grid upgrades, the renewable energy transition, and the explosive growth of data centers.
According to the Wind Trading Desk, Jens Spiess, an analyst from Morgan Stanley's Mexico division, along with global teams, has released a research report. The core judgment is that the US power grid is experiencing a supply-demand mismatch that will persist until at least 2030. The large power transformer (LPT) market is expected to expand at a compound annual growth rate (CAGR) of approximately 14%, providing a window of excess profits for manufacturers for several years.
Looking at both supply and demand, US electricity demand has returned to a growth trajectory after two decades of stagnation. Aging infrastructure urgently requires renewal, and the large-scale integration of wind and solar power brings new transmission demands. Coupled with the explosive expansion of data centers, these forces are collectively driving a surge in demand for large power transformers (LPTs), while domestic US production falls far short. Since 2021, the apparent consumption of large power transformers in the US has more than tripled, while domestic production has only increased by less than 60% during the same period. Import reliance has climbed from about 70% in 2021 to over 85%.
Profit elasticity is highest for &#34;pure-play&#34; transformer manufacturers. In a bull case scenario, driven by LPT market growth, earnings per share (EPS) forecasts for Hyundai Electric, GEV, WEG, LS Electric, and Sieyuan Electric have upside potential of 8%, 6%, 5%, 4%, and 4%, respectively, by 2027. Manufacturers have locked in high profits through price adjustment clauses in their contracts; with current order backlogs ranging from 3 to 5 years, high profitability is expected to be maintained until at least 2030.
<h2>Demand Side: It’s More Than Just Aging Power Grids</h2>
The aging of the US power grid is the starting point, but it's not the whole story. Data from the US Department of Energy in 2024 shows that approximately 55% of distribution transformers in service are over 33 years old—exceeding their normal lifespan.
A larger variable comes from the fundamental shift in the structure of electricity demand. US power demand was almost stagnant for the previous 20 years (with a CAGR of about 0.4%), but Morgan Stanley now predicts an annual growth rate of 2.6% through 2035—a forecast that has been revised upward several times over the past two years.
Approximately 78% of the incremental demand comes from data centers, whose electricity consumption will grow at an annual rate of about 30% over the next five years. Their share of total US electricity consumption is expected to rise from about 6% in 2024 to about 18% by 2030. It is estimated that US data centers will add about 74 GW of electricity demand between 2025 and 2028, resulting in a power supply gap of 9 to 18 GW.
The rapid expansion of renewable energy is driving transformer demand from another dimension. Distributed, multi-site power generation requires a step-up transformer at each connection point. The greater the installed capacity, the more transformers are needed. By 2035, the share of renewable energy in the US generation mix is expected to rise from about 23% in 2024 to about 32%, with wind and solar accounting for approximately 53% of the 759 GW of new capacity.
<h2>Capacity Can’t Keep Up: New Factories Won’t Come Online Until 2027 at the Earliest</h2>
How severe is this supply-demand mismatch? In 2024, domestic US LPT production was only about 200 to 300 units. To support the new power generation capacity added between 2025 and 2030 alone, approximately 4,300 LPTs will be required—2 to 3 times current domestic production (assuming no capacity expansion). If grid modernization and microgrid renovation needs are included, this figure could quadruple.
Companies such as Siemens Energy, Hyundai Electric, Eaton, Hitachi Energy, and Prolec GE have successively announced capacity expansions in North America, with investments ranging from tens of millions to over $1 billion. However, it typically takes 1 to 3 years for a new transformer factory to begin production, and lead times for manufacturing equipment itself can sometimes reach 6 years. The highly customized nature of these products further extends production cycles. Most new capacity will not come online until 2027 to 2029, during which time the market will remain supplier-dominated.
Transformer prices have risen by a cumulative 80% over the past five years, though the pace of price increases is slowing. Management at WEG, GE Vernova, and Siemens Energy have all mentioned stabilizing pricing in recent earnings calls. This is not a turning point for profit margins—manufacturers have already locked in high margins within their backlogs through price adjustment mechanisms (covering raw materials, inflation, and tariff shocks), extending the high-profitability window to at least 2030.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d63ae97e-2c05-43f7-872c-8f150fd93a43.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d63ae97e-2c05-43f7-872c-8f150fd93a43.png"/>
Furthermore, Morgan Stanley upgraded the ratings of seven companies. Among them, Hyundai Electric has the highest exposure to North America, with orders covered through 2028 and a record Q4 operating margin of 27.6%. GE Vernova has an order backlog of $30.5 billion with visibility extending to the end of the decade. Eaton's electrical business backlog hit a record high of $15.3 billion, with capacity expansion projects being implemented intensively. The backlog of Siemens Energy's Grid division reached €21.4 billion, with the full realization of sustained margin expansion yet to come. Sieyuan Electric is benefiting from tight global supply, with rapid growth in overseas orders and continued entry into mature markets. CG Power plans to expand its large transformer capacity to five times its current level and has already secured hundreds of millions in orders from US data centers. LS Electric is benefiting from power distribution demand in AI data centers, with an expected EPS CAGR of approximately 45% from 2025 to 2028.

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The latest research report from Morgan Stanley reveals that the US large power transformer (LPT) market is in a rare supply-demand mismatch window. Driven by multiple factors—including a 30% five-year growth in data center electricity demand and large-scale renewable energy integration—domestic US production covers only one-third of actual demand, with import dependency exceeding 85%. New factories will not come online until 2027 at the earliest, locking in a supplier-dominated landscape through 2030. Seven manufacturers, including Hyundai Electric and GEV, now see significant room for upward profit revisions

- The U.S. is experiencing a transformer supercycle driven by grid upgrades, renewable energy transitions, and explosive growth in data centers.  
- Demand for large power transformers is projected to grow at a compound annual growth rate of approximately 14%, with a significant supply-demand imbalance expected to last until at least 2030.  
- By 2035, around 78% of incremental electricity demand will come from data centers, leading to an anticipated power supply gap of 9 to 18 GW, while domestic production of transformers will not keep pace with this increasing demand.

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AI Wave plus Grid Overhaul: Morgan Stanley Proclaims US Transformer Supercycle to Last Until 2030