Is ETN stock a good buy for AI data center exposure?

Eaton's Electrical Americas segment explicitly cites data center end-markets as a growth driver (+15% YoY). With 30.3% operating margins—twice GEV's Electrification margin—and a 37.3x P/E vs GEV's 98.9x, ETN offers quality AI exposure at a more reasonable valuation.

Is GE Vernova overvalued compared to Eaton?

Using P/E ÷ ROIC as a valuation efficiency metric, GEV trades at 27.7x (98.9 ÷ 3.57) while ETN trades at 2.0x (37.3 ÷ 19.09). GEV would need to 6x its ROIC to match ETN's valuation efficiency, which is unrealistic for an industrial company.

Which AI power infrastructure stock has the best margins?

ETN's Electrical Americas has 30.3% operating margin, versus GEV's Electrification at 15.7% and CAT's Energy & Transportation at 20.0%. ETN generates twice the margin per dollar of revenue as GEV despite similar growth exposure to AI data centers.

ETN vs GEV: which is the better AI power play?

For risk-adjusted returns, ETN is the quality play: 19.09% ROIC, 30.3% segment margins, explicit data center exposure, and manageable execution risk. GEV is the speculative bet on Electrification growth overcoming spinoff complexity and credit rating concerns.

Why is GEV's P/E ratio so high?

GEV trades at 98.9x TTM P/E because its operating margin is only 3.66%—the Wind segment operated at breakeven (-0.1% margin) and dragged overall profitability. The market is pricing in massive margin expansion from the +32% growing Electrification segment.

Does Caterpillar benefit from AI data centers?

Yes. CAT's Energy & Transportation segment grew +17% YoY with stable 20% margins, driven by power generation demand including data center backup power. However, overall company revenue is -1.5% YoY as Construction and Resource Industries face tariff pressure.

What is Eaton's Electrical Americas segment?

Electrical Americas is ETN's largest segment at $3.41B quarterly revenue with 30.3% operating margin. It includes power distribution equipment, electrical components, and data center infrastructure. Q3 2025 filings explicitly state growth was due to strength in data center end-markets.

What is GEV's ROIC and why does it matter?

GEV's TTM ROIC is 3.57%—far below ETN's 19.09% and CAT's 28.39%. ROIC measures how efficiently a company generates returns on invested capital. GEV's low ROIC means the 98.9x P/E requires massive profitability improvement to justify.

What are the risks to GE Vernova stock?

Key GEV risks include: credit rating dependency (if ratings drop, contract awards and financing costs suffer), $7.7B off-balance sheet exposure, $1.49B warranty liability, Wind segment struggles (-9% revenue YoY), and post-spinoff accounting complexity that obscures stand-alone performance.

How do tariffs impact Caterpillar's margins?

CAT expects $1.6-1.75 billion in tariff impact for 2025, affecting Construction Industries (-303 bps margin) and Resource Industries (-425 bps margin) most severely. Energy & Transportation maintained stable margins (+1 bps) due to different supply chain configurations.

What is off-balance sheet exposure?

Off-balance sheet exposure includes obligations not on the balance sheet: credit guarantees, warranty liabilities, indemnifications, and legal commitments. GEV has $7.7B off-balance exposure including $1.49B warranty liability and $1.01B indemnification from the GE spinoff.

How do you compare P/E to ROIC?

P/E ÷ ROIC measures how much you pay per point of capital efficiency. Lower is better. GEV: 98.9 ÷ 3.57 = 27.7x (expensive). ETN: 37.3 ÷ 19.09 = 2.0x (reasonable). CAT: 24.4 ÷ 28.39 = 0.9x (cheap). This shows relative valuation efficiency.

Is GEV a buy in 2026?

GEV is a high-risk, high-reward bet on AI power demand. The bull case: Electrification segment +32% growth, Power segment sold out through 2028, and Prolec GE acquisition adds capacity. The bear case: 98.9x P/E with 3.57% ROIC requires massive improvement, $7.7B off-balance exposure, and credit rating dependency creates binary risk. For quality-focused investors, ETN offers similar AI exposure at lower risk.

GE Vernova's Electrification segment grew +32% YoY, but the company trades at 98.9x earnings with a 3.57% ROIC. Eaton's Electrical Americas grew +15% with 30.3% operating margins—twice GEV's margin at half the P/E. MetricDuck data shows why quality beats hype in AI infrastructure.

Why ETN Beats GEV: The Smarter AI Power Play

Last Updated: January 17, 2026 Data Currency: Q3 2025 10-Q filings. GEV SEC Filings | ETN SEC Filings | CAT SEC Filings

TL;DR: GE Vernova trades at 98.9x earnings while generating 3.57% ROIC. Eaton trades at 37.3x earnings while generating 19.09% ROIC. Both companies are growing their data center-exposed segments at double-digit rates. One of these stocks is mispriced. MetricDuck's SEC filing analysis reveals why ETN delivers 2x the margin at similar growth with half the execution risk—making it the quality play in AI power infrastructure.

Key Facts:

GEV P/E ÷ ROIC: 27.7x (paying 27.7x for each point of ROIC)
ETN P/E ÷ ROIC: 2.0x (reasonable growth premium)
CAT P/E ÷ ROIC: 0.9x (discounting current profitability)
ETN Electrical Americas margin: 30.3% vs GEV Electrification 15.7% (2x difference)
GEV off-balance sheet exposure: $7.7B (credit rating dependent)
ETN explicit data center exposure: "strength in data center end-markets" (Q3 10-Q)

The Valuation Paradox: When P/E Tells a Misleading Story

The AI data center power narrative has made GE Vernova one of 2025's hottest industrial stocks. But the numbers tell a more complicated story.

Metric	GEV	ETN	CAT
P/E (TTM)	98.9x	37.3x	24.4x
ROIC (TTM)	3.57%	19.09%	28.39%
P/E ÷ ROIC	27.7x	2.0x	0.9x
Operating Margin (TTM)	3.66%	24.39%	17.65%

The P/E ÷ ROIC ratio reveals what traditional valuation metrics obscure:

GEV: Market is paying 27.7x for each point of ROIC
ETN: Market is paying 2.0x for each point of ROIC
CAT: Market is paying 0.9x for each point of ROIC (discounting current earnings)

What would GEV need to justify its valuation?

At ETN's 2.0x valuation efficiency, GEV would need ~50% ROIC. At CAT's 0.9x ratio, GEV would need ~110% ROIC. Neither is realistic for an industrial company. For context, GEV would need to 6x its current ROIC just to match ETN's valuation efficiency at the same P/E.

Implied Expectations: GEV's current valuation implies ROIC improving from 3.57% to ~21%—a nearly 6x improvement. ETN only needs to maintain its current trajectory. CAT is priced for margin decline to continue.

AI Data Center Exposure: Who Really Benefits?

All three companies have AI data center exposure. The difference is margin quality.

GEV: Highest Growth, Lowest Profitability

Segment	Q3 Revenue	YoY Growth	Operating Margin	Margin Change
Electrification	$2,537M	+32%	15.7%	+550 bps
Power	$4,838M	+15%	12.4%	+120 bps
Wind	$2,619M	-9%	-0.1%	+1,070 bps

GEV's Electrification segment is the AI story. Growth is impressive at +32%, and margin improvement of +550 bps suggests operational leverage.

From GEV Q3 2025 10-Q: "Revenue increased driven by higher volumes and favorable pricing."

The problem: GEV's consolidated operating margin is only 3.66% because the Wind segment is dragging overall profitability. Wind at -0.1% margin (though improved from -10.8%) dilutes the Electrification gains.

ETN: Proven Data Center Execution

Segment	Q3 Revenue	YoY Growth	Operating Margin	Margin Change
Electrical Americas	$3,410M	+15%	30.3%	+20 bps
Electrical Global	$1,724M	+10%	19.1%	+40 bps
Aerospace	$1,079M	+14%	25.9%	+150 bps
Vehicle	$639M	-8%	17.8%	-160 bps
eMobility	$136M	-19%	-6.6%	-220 bps

ETN's Electrical Americas explicitly cites data center strength—and at 30.3% operating margin, it's twice as profitable as GEV's Electrification segment at similar growth rates.

From ETN Q3 2025 10-Q: "The increase in organic sales in the third quarter of 2025 was due to strength in data center end-markets in the Electrical Americas and Electrical Global business segments."

The filing couldn't be clearer about ETN's AI data center exposure. Unlike GEV, there's no underperforming segment (Wind) dragging down consolidated margins.

CAT: E&T Strong, But Core Business Weakening

Segment	Q3 Revenue	YoY Growth	Operating Margin	Margin Change
Energy & Transportation	$8,397M	+17%	20.0%	+1 bps
Construction Industries	$6,760M	+7%	20.4%	-303 bps
Resource Industries	$3,110M	+2%	16.0%	-425 bps
Financial Products	$1,076M	+4%	22.4%	-20 bps

CAT's E&T segment includes data center backup power and is growing +17% with stable 20% margins. But Construction and Resource face severe margin compression from tariffs.

From CAT Q3 2025 10-Q Forward Guidance: "We expect the impact from incremental tariffs for 2025 will be around $1.6 billion to $1.75 billion, net of some mitigating actions."

The Margin Quality Gap

Here's the critical insight: Growth rates are similar, but margin quality is radically different.

Segment	YoY Growth	Operating Margin	Revenue Quality
GEV Electrification	+32%	15.7%	Volume-driven
ETN Electrical Americas	+15%	30.3%	Mix + pricing
CAT Energy & Transportation	+17%	20.0%	Volume + pricing

ETN's margin is twice GEV's Electrification margin at roughly half the growth rate. This suggests:

ETN has pricing power GEV lacks
ETN's cost structure is more efficient
GEV's growth may be volume-driven (lower quality) vs ETN's mix-driven (higher quality)

For every dollar of revenue, ETN keeps 30.3 cents as operating income. GEV keeps 15.7 cents.

Execution Risk: What Could Go Wrong?

GEV: Binary Credit Risk

The most concerning disclosure in GEV's 10-Q is the credit rating dependency:

From GEV Risk Landscape: "If we are unable to maintain investment grade ratings, we could face significant challenges in being awarded new contracts, substantially increasing financing and hedging costs, and refinancing risks."

This isn't generic risk language—it's specific to GEV's business model. Power equipment contracts often require credit guarantees. A downgrade would directly impact revenue, not just financing costs.

Quantified Off-Balance Sheet Exposure:

Category	Amount
Total Off-Balance Exposure	$7.7B
Product Warranty Liability	$1.49B
Indemnification (GE Spinoff)	$1.01B
Credit Support Obligations	$565M

GEV is transitioning away from GE credit support (71% reduction since spinoff), but this creates uncertainty during the transition.

ETN: Known and Manageable Risks

ETN's top risk is supply chain inflation, but it's being managed:

Driver	Gross Margin Impact
Commodity/wage inflation	-340 bps
Higher sales offset	+240 bps
Operating efficiencies	+130 bps
Net Impact	-30 bps

The Brazil tax dispute ($85M principal + $145M interest/penalties) is material but quantified and being contested. No binary credit rating risk.

CAT: Transparent but Material

CAT wins on transparency—they explicitly quantify tariff impact at $1.6-1.75B. But that's 2.5% of revenue absorbed by tariffs, with Construction (-303 bps) and Resource (-425 bps) margins declining significantly.

Risk Comparison:

Company	Primary Risk	Severity	Quantified?
GEV	Credit rating downgrade	HIGH	Qualitative only
ETN	Inflation/M&A integration	MEDIUM	Yes (-30 bps net)
CAT	Tariff impact	MEDIUM	Yes ($1.6-1.75B)

Cash Flow Quality: Following the Money

The Cash Conversion Trap

Metric	GEV	ETN	CAT
Cash Conversion (TTM)	2.01x	1.05x	1.24x
OCF Margin (TTM)	9.1%	15.4%	17.8%
FCF Margin (TTM)	6.6%	12.5%	13.8%

GEV's 2.01x cash conversion looks impressive but is misleading. Cash conversion above 2.0x typically indicates:

Non-cash charges exceeding depreciation
Working capital release (one-time)
Earnings quality issues

Post-Spinoff Accounting: GEV's filing notes that "financial statements prior to the spin-off are derived from GE's consolidated statements, which may obscure stand-alone operational performance." Be cautious comparing GEV's ratios to peers.

FCF Comparison:

Company	FCF (TTM)	FCF Margin	FCF Yield
GEV	~$2.5B	6.6%	~1.4%
ETN	~$3.3B	12.5%	~2.8%
CAT	~$8.9B	13.8%	~3.6%

CAT generates nearly 4x GEV's FCF on ~1.7x the revenue.

The Investor Playbook: Three Profiles, Three Choices

Profile 1: Growth Maximalist → GEV

Thesis: AI power demand will overwhelm all execution risks.

Accept 98.9x P/E for +32% Electrification growth
Believe Wind segment turnaround continues
Comfortable with binary credit risk
Time horizon: 3-5 years for ROIC improvement
Risk tolerance: HIGH

Bull Case: Prolec GE acquisition ($5.3B, closing mid-2026) adds transformer capacity. Power segment "sold out through 2028." S&P/Fitch upgrades suggest credit trajectory is positive.

Profile 2: Quality-First → ETN (Recommended)

Thesis: Margin quality matters more than headline growth.

30.3% segment margin with explicit data center exposure
Boyd Thermal acquisition ($9.5B) adds data center thermal management
19.09% ROIC justifies 37.3x P/E
Manageable inflation/integration risk
Risk tolerance: MEDIUM

From ETN Q3 2025 Filing: Management is "capitalizing on the megatrends of the energy transition, electrification, and digitalization" and "positioning Eaton for growth for years to come."

Profile 3: Value/Income → CAT

Thesis: Best-in-class ROIC at lowest valuation provides margin of safety.

28.39% ROIC at 24.4x P/E
$8.9B FCF supports dividend and buyback
E&T segment provides AI optionality without concentration
Tariff headwind is near-term pain, may pass
Risk tolerance: MEDIUM

From CAT Q3 2025 10-Q: "We are optimistic about our sales and revenues momentum... strong demand signals and a robust backlog, particularly in Energy & Transportation."

What Could Make Us Wrong

Bull Case for GEV

Prolec GE acquisition ($5.3B) closes mid-2026, adding transformer capacity
Power segment is "sold out through 2028"—pricing power potential
Wind segment turnaround already shows +1,070 bps margin improvement
Credit upgrades from S&P/Fitch suggest trajectory is positive

Bear Case for ETN

Boyd Thermal integration risk ($9.5B is large for ETN)
Inflation pressures are real (-340 bps gross margin drag)
Premium valuation requires execution consistency

Bear Case for CAT

Tariffs could persist beyond 2025
Construction and Resource are structurally weak
E&T alone cannot drive company-level growth

GEV vs ETN: Direct Comparison

Which AI power infrastructure stock is the better investment? Here's the direct head-to-head breakdown based on Q3 2025 SEC filings.

Factor	GEV	ETN	CAT
AI Segment Growth	+32%	+15%	+17%
AI Segment Margin	15.7%	30.3%	20.0%
P/E (TTM)	98.9x	37.3x	24.4x
ROIC (TTM)	3.57%	19.09%	28.39%
P/E ÷ ROIC	27.7x	2.0x	0.9x
OCF Margin	9.1%	15.4%	17.8%
Off-Balance Exposure	$7.7B	Not quantified	$491M
Primary Risk	Credit rating	Inflation/M&A	Tariffs
Risk Quantified?	No	Yes	Yes

Weighted Score Card: MetricDuck Evidence

Factor	Weight	GEV	ETN	CAT
AI Segment Growth	30%	9/10	8/10	7/10
Margin Quality	25%	4/10	9/10	7/10
Cash Generation	20%	5/10	8/10	9/10
Execution Risk	15%	4/10	7/10	6/10
Valuation	10%	2/10	6/10	8/10
Weighted Total	100%	5.35/10	7.80/10	7.20/10

ETN scores highest on our weighted framework, driven by superior margin quality and manageable execution risk. CAT offers the best value proposition. GEV offers the highest growth but at the highest risk.

Caterpillar AI Infrastructure: Why E&T Segment Is the Real Growth Story - Deep dive on CAT's data center power exposure
AI Infrastructure Investing Hub - Complete research library on AI capex and power demand

Methodology and Data Sources

Data Sources

Source	Coverage
SEC 10-Q Filings	Q3 2025 (all companies)
MetricDuck Filing Intelligence	5-pass analysis complete
BigQuery Metrics	GEV: 199, ETN: 205, CAT: 198 metrics

Analytical Framework

P/E ÷ ROIC for valuation efficiency comparison
Segment-level analysis for AI exposure identification
Risk landscape extraction for execution risk assessment
Cash flow quality metrics for earnings verification

Limitations

GEV is a new public company (2024 spinoff) with limited standalone history
Segment definitions vary across companies
Forward projections (backlog, acquisition synergies) are management estimates
Data center revenue is not explicitly disclosed by any company—exposure is inferred from segment drivers

Data as of Q3 2025 10-Q filings. For latest SEC filings, visit GEV, ETN, CAT. For company details, see GEV, ETN, CAT.

Disclosure

MetricDuck Research does not hold positions in GEV, ETN, or CAT. This analysis is based solely on publicly available SEC filings and is provided for educational purposes. Always conduct your own research before making investment decisions.

Explore More AI Infrastructure Research

This article is part of our comprehensive AI Infrastructure Hub, which covers capex efficiency metrics, depreciation manipulation detection, and supply chain analysis.

Related AI infrastructure research:

How to Track AI Capex Efficiency — 3-metric framework for monitoring hyperscaler spending
AI Data Center Risk Screen — 4 signals Wall Street misses
Nuclear Utility Risk Screen — VST, CEG, TLN hidden liabilities

Why ETN Beats GEV: The Smarter AI Power Play (2026)