BorgWarner (NYSE: BWA) has signed a significant supply agreement to manufacture turbine generators for the burgeoning data center market, marking a strategic pivot from its traditional automotive focus. This partnership with TurboCell, a subsidiary of Endeavor, is expected to generate over $300 million in sales within the first year of production, set to begin in 2027. With the data center generator market valued at $8.5 billion, BorgWarner aims to leverage its engineering expertise to meet the increasing demand for reliable power sources.
This move comes at a crucial time as EV adoption in North America slows, potentially offsetting declines in its core automotive business, which still accounts for over 80% of revenue. While the company faces challenges in its battery energy systems segment, the new turbine generators are projected to deliver mid-teens incremental margins and be accretive to earnings per share from the outset, enhancing overall profitability.
Investors should note that while BorgWarner’s stock has doubled in the past year, it trades at a multiple that is historically low for the company. As it diversifies into the infrastructure market, the long-term impact of this shift remains uncertain, warranting cautious evaluation for potential investment.
Source: nasdaq.com