Shares of the generator manufacturer soared: a deal with Amazon strengthened its position in AI
Power equipment manufacturers are becoming a key component of the artificial intelligence infrastructure, according to MarketWatch
Shares of Generac, a manufacturer of backup and off-grid power equipment, soared more than 33% after the market closed on September 16. Photo: J.A. Dunbar/Shutterstock
Shares of Generac, a manufacturer of backup and off-grid power supply equipment, soared by more than 33% in after-hours trading on September 16. The company signed an agreement worth up to $8 billion with tech giant Amazon to supply backup generators for data centers. Amazon’s stock price rose by about 1% at the same time. The deal cemented Generac’s status as a major player in the AI energy market, according to MarketWatch.
What is known about the deal
The agreement includes initial deliveries of backup generators to Amazon worth $2.4 billion in 2027 and 2028, according to transaction documents filed by Generac with the U.S. Securities and Exchange Commission (SEC).
In addition, the agreement calls for the transfer of warrants worth up to $340 million to a wholly-owned Amazon subsidiary, which will allow the company to repurchase Generac shares through 2033. According to the documents, Generac issued warrants to Amazon to purchase up to 1.69 million shares at a price of $200.93 per share. On September 16—the day the deal was announced—this price represented a premium of nearly 15 percent over Generac’s market price (the stock closed at $175.11 per share on Wednesday).
The number of warrants transferred is equivalent to nearly 3% of Generac's total outstanding shares, according to CNBC.
Why Is This Important for Generac?
For Generac—a company with a market capitalization of $10.3 billion that, among other things, manufactures electric vehicle chargers and solar energy storage systems, and whose residential generators are widely sold at major retail chains such as Home Depot and Costco— — the deal with Amazon marked a huge step forward, notes MarketWatch.
In its quarterly financial report released in July, Generac noted “ongoing momentum” in sales of data center equipment and pledged to ramp up production of megawatt-class backup generators—ultra-high-power industrial units capable of supplying power to entire server complexes. At that time, the company estimated its order backlog in the AI data center market at approximately $1.6 billion.
In a presentation to investors in March, Generac projected that sales in this segment would reach $1 billion by 2028, calling this trend a “once-in-a-generation growth opportunity.”
Why Is This Important for Amazon?
Amazon Web Services, the company's cloud computing division, is rapidly expanding its data center capacity amid the AI boom, according to CNBC. To meet its growing energy needs, the company is signing contracts with equipment suppliers—and the deal with Generac is the latest example of this. Last week, Amazon reached an agreement with Qualcomm to use its specialized AI chips and received warrants to purchase up to $4 billion worth of the developer’s shares.
What Wall Street Thinks About Generac Stock
Since the beginning of the year, Generac’s stock has risen 28%, while the S&P 500 index has gained about 10% over the same period. The current consensus analyst rating for Generac stock is “Overweight” (above market), according to MarketWatch data. Most analysts covering the company (16) recommend buying Generac shares (with “Buy” and “Overweight” ratings), while another eight advise holding them in a portfolio. There are no negative recommendations. The average target price of $295 per share implies a 68% upside potential compared to Wednesday’s closing price.
This article was AI-translated and verified by a human editor
