Babcock & Wilcox surges 25% on $2.4B AI data center power deal
Design-build agreement with Applied Digital-backed Base Electron highlights growing energy demands of artificial intelligence infrastructure
Babcock & Wilcox Enterprises shares surged as much as 25% on Wednesday after the industrial equipment maker secured a $2.4 billion contract to supply power generation capacity for artificial intelligence data centers, capitalizing on the explosive energy demands of the AI boom.
The Akron, Ohio-based company received a full notice to proceed on the design-build agreement with Base Electron, an independent power producer backed by Applied Digital, to deliver 1.2 gigawatts of new power generation capacity for Applied Digital's AI Factory campuses. The announcement marks a significant transformation for Babcock & Wilcox, traditionally known for boilers and power generation equipment, as it positions itself as a critical enabler of AI infrastructure expansion.
The project involves constructing four 300-megawatt natural gas-fired boilers and steam turbine generator systems, with Siemens Energy tapped to supply the steam turbine generator sets, according to the company's announcement. The facility is targeted to begin operations in 2028, coinciding with the anticipated acceleration of AI computing capacity deployment.
Babcock & Wilcox also reported quarterly results that exceeded Wall Street expectations, with revenue of $161 million topping analyst estimates of $155.6 million. The company disclosed that its current pipeline of opportunities exceeds $12 billion, suggesting significant potential for additional contracts in the AI power infrastructure space.
The stock's dramatic rise to $10.10 represents its highest level since November 2024, pushing the shares well above the current analyst price target of $8.75. Babcock & Wilcox now commands a market capitalization of approximately $1 billion, a remarkable recovery from its 52-week low of $0.22 reached last year. The stock's 52-week high stands at $11.57.
Applied Digital's AI Factory campuses represent the cutting edge of specialized data center infrastructure designed to handle the intensive computational requirements of large-scale AI training and inference workloads. The company has been rapidly expanding its footprint, with roughly 4 gigawatts of capacity in its development pipeline, according to market analysis.
The power requirements for AI data centers have emerged as a critical bottleneck in the industry's expansion. Traditional data centers typically consume 50-100 megawatts of power, while AI-focused facilities can require several times that capacity. Natural gas-fired generation offers a more reliable and scalable solution compared to renewable sources for the continuous, high-power demands of AI computing infrastructure.
"This project underscores B&W's role in meeting the rapidly increasing power demands of large-scale AI data centers," the company stated in its announcement, highlighting the strategic pivot toward serving the AI infrastructure market.
The contract with Base Electron builds on a limited notice to proceed issued in November 2025, demonstrating momentum in Babcock & Wilcox's AI-focused business development. The company's high institutional ownership of 89.2% suggests that large investors had been anticipating such a transformative deal, which could help reverse the company's recent financial challenges.
Babcock & Wilcox has been working to improve its financial performance, having reported a 39% increase in full-year bookings to $889.6 million and a 47% growth in backlog to $540.1 million in its most recent annual results. However, the company still faces headwinds, with trailing twelve-month negative earnings per share of $0.70 and a profit margin of negative 15%.
The Applied Digital project represents one of the largest contracts in Babcock & Wilcox's recent history and could serve as a template for future deals with other AI data center developers. As tech giants and specialized AI companies race to build computing capacity, the demand for reliable, scalable power infrastructure is expected to intensify significantly over the coming years.
Applied Digital's CEO Wes Cummins has indicated that the company is exploring the option to add another 1.2 gigawatts of generation capacity in the future with Base Electron, suggesting potential follow-on business for Babcock & Wilcox if it performs successfully on the initial project.
The surge in Babcock & Wilcox shares reflects broader investor enthusiasm for companies positioned to benefit from the AI infrastructure build-out. As power generation constraints emerge as a critical limiting factor for AI expansion, equipment suppliers and engineering firms with expertise in large-scale power projects are increasingly viewed as essential partners in the AI revolution.