Baird Says Buy These 2 AI Power Stocks Before the Next Wave

For the past two years, investors have focused on AI chips, but they are now looking at something far less glamorous yet just as essential: electricity

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The boom in AI data center construction is creating shortages of transformers, switchgear, and other critical electrical equipment, with some lead times stretching beyond three years. As hyperscalers race to bring new AI capacity online, the companies supplying the power infrastructure behind those facilities are becoming ever more important, opening up opportunities for investors.

AI-related power investments span the electricity ecosystem, from large-scale utilities and independent power producers to off-grid energy providers, electrical equipment manufacturers, and specialized hardware and software companies that keep data center power systems running reliably.

Baird analyst Luke Junk believes this trend is only gaining momentum. Looking ahead to the next phase of AI expansion, he has pinpointed two AI power-related stocks that he believes are well positioned to benefit.

According to TipRanks' database, both stocks also carry Strong Buy consensus ratings from Wall Street. Here's why Junk – and the rest of the Street – think they're worth a closer look.

Forgent Power Solutions (FPS)

The first Baird pick is Forgent Power Solutions, a leading designer and manufacturer of electrical distribution equipment. The company boasts more than 100 years of experience designing and manufacturing electrical distribution equipment, with a broad portfolio that includes panels and switchgear, transformers, transfer switches, connector systems, and prefabricated solutions for off-grid power. Its products are used in utility installations, industrial facilities, and data centers.

The company conducts its manufacturing activities across 2 million square feet of factory space, spread over 10 campuses in five geographic locations, and employs more than 1,800 people. Its manufacturing scale, combined with the breadth of its product lineup, allows Forgent to provide customers with comprehensive power solutions for demanding, power-intensive industries.

Importantly, Forgent delivers these solutions as end-to-end builds, handling everything from in-house engineering and the production of critical components to the integration of customized systems into customers' existing facilities. This approach helps ensure reliable power under even the most demanding operating conditions.

Forgent went public earlier this year. Following the full exercise of the underwriters' overallotment option, the company sold 19,074,391 shares at $27 each, while existing shareholders sold 45,325,609 shares. The company received about $491.8 million in net proceeds from the offering.

Since its first-day closing price, the stock has climbed about 39%. That gain comes despite a mid-June pullback after the company priced a secondary offering of more than 43 million shares at $49 each.

In May, Forgent reported its second quarterly results as a public company, covering fiscal 3Q26. Revenue reached $378.7 million, up 103% year over year and nearly $37 million ahead of Wall Street's expectations. Bookings jumped 308% from a year earlier to $867 million, while backlog increased 157% to $1.98 billion.

Baird's Luke Junk believes Forgent is well positioned to benefit from the AI infrastructure buildout, citing both the company's strong strategic fit with the industry and its large addressable market.

"Forgent was purpose-built for the AI infrastructure build-out, embracing a strong growth/market share focus within a smaller electrical sub-market. Lead times and availability are being deployed as weapons to add new customers, and these relationships are quickly maturing realtime (as viewed through lens of rapid powertrain solutions growth). Finally, direct hyperscaler engagement represents open water, as colos/neo clouds/EPCs were initially in focus as FPS scaled. Net, we like FPS for aggressive growth investors, with the recent pullback offering improved risk/reward," Junk opined.

Given all that, Junk rates FPS stock an Outperform (i.e., Buy) and sets a $55 price target, implying potential upside of 36% over the next 12 months. (To watch Junk's track record, click here)

The rest of the Street is just as bullish. FPS earns a Strong Buy consensus rating based on 11 recent analyst reviews, including 10 Buys and just 1 Hold. With the shares trading at $40.31, the average price target of $59.45 points to an even more compelling 47% upside over the coming year. (See FPS stock forecast)