Generac Soars After $2.4B Deal to Provide Backup Power for Amazon

One hyperscaler’s backup plan is another company’s “generational growth opportunity.”

On Thursday, shares of backup power supply company Generac spiked 18.34% after it agreed to supply some $2.4 billion worth of generators to Amazon’s vast data center empire over the next two years. Generac is just the latest in a growing list of unlikely beneficiaries of AI’s energy gridlock.

Tipping the Hyperscales

The company disclosed in its second-quarter earnings call back in July that it had struck agreements with not one but two leading hyperscalers: A filing with the SEC this week revealed both that the second deal was with Amazon and the agreement’s massive scale. 

It’s hardly shocking that the backup power company, whose clientele typically includes healthcare, industrial and residential properties, would venture into the data center game. Backup power is critical at installations for which even momentary power outages can corrupt weeks’ worth of AI training progress and fry critical hardware. Meanwhile, connecting to any traditional power source at all has become a bottleneck for the industry. That places generator companies like Generac at the center of hyperscaler efforts to create decentralized, behind-the-meter micro-grids:

• Surging data center demand will require some $110 billion worth of new power plants through 2030, according to a recent Moody’s estimate, but it now takes an average of five years for utility players to gain grid interconnection, according to the Lawrence Berkeley National Laboratory. 
• In its most recent earnings call, Generac said that its data center backlog already totaled $1.6 billion before accounting for the Amazon agreement. 

Power Trip-Up: Earlier this year, the company told investors that the data center boom represented a “generational growth opportunity.” But to meet the demand of its new agreements, Generac will have to triple its capacity by next year, Canaccord analyst George Gianarikas wrote in a note to clients on Wednesday. Amazon appears ready to help out. As part of the agreement, an Amazon subsidiary received a warrant to buy up to 1.69 million shares of Generac at $201 a pop, though the full offering is only available if Amazon can fill its shopping cart with $8 billion worth of generators.