Can ABB Sustain Its Ascent?

From a stockmarket purgatory in the early noughties to the pinnacle of the AI infrastructure era: ABB is charting one of the most spectacular turnarounds in the industrial landscape. However, behind this rise, the pressure intensifies with every earnings release.

ABB is a success story that nearly turned into a nightmare at the turn of the millennium. Growing too fast, too hard and going too high, the company came perilously close to collapse before, in a brutal refocusing, it slashed its workforce in two between 1995 and 2005. Today, ABB concentrates on three divisions: Electrification, Motion and Automation, i.e. sectors that perfectly match contemporary needs.

After years of restructuring, the Swiss-Swedish giant has established itself as an undisputed leader. Under the leadership of Björn Rosengren, ABB has restored its profitability and won over investors. While the group is poised to revisit its historical highs, past efforts alone do not fully explain this meteoric rise.

The Golden Goose

Once again, AI is dictating the pace of industrial transformation. Power supply for data centers has become a major bottleneck. In the United States, demand is exploding: the group's orders surged by 67% in Q1 2026. With delivery lead times ranging from 12 to 24 months, the 22% growth in the order backlog provides solid visibility for future earnings.

According to the International Energy Agency, electricity demand from data centers is expected to more than double by 2030. As a key supplier, ABB is set to capitalize on this trend. This is the same tailwind that propelled Schneider Electric; the correlation in stock performance between the two companies over the past five years is striking.

In parallel, ABB's "Motion" segment's orders increase by 9%. While growth in Automation is limited to 5%, it remains supported by robust demand in the maritime and port sectors.

However, the current momentum must not overshadow a major challenge for the company.

The Price of Success

This is not a question of the company's health or its results. Rather, investor attention must focus on ABB's valuation. The aforementioned restructuring has pushed margin expansion and cost streamlining to their limits. Market enthusiasm for the company's strategic position in the data center supply chain has done the rest.

The question now is what levers the company has left to pull. Revenue growth linked to AI infrastructure already appears priced in, while the potential for further optimization is limited. A P/E multiple of 27x is not necessarily a negative signal, but for an industrial conglomerate, the margin for error at this valuation level is virtually zero. Analysts expect EPS to plateau in the coming years, suggesting that the upside is largely baked into the share price. What remains is its membership in the broader AI family, which moves mountains (and valuation multiples). This is the primary driver for share appreciation, all else being equal. Buying ABB at these levels is a bet on the continuation of a technological supercycle.