The digital gold rush of the 21st century isn’t happening in the mines – it’s happening in massive, high-tech warehouses packed with servers. As Artificial Intelligence (AI) and cloud computing demand skyrocket, the physical infrastructure required to power these technologies is undergoing a historic expansion that has lifted some Canadian growth stocks to all-time highs.
Once an estimated US$650 billion AI data centre spend earlier this year, recent first-quarter (Q1 2026) numbers show the big-four hyperscalers – Meta Platforms, Alphabet, Amazon, and Microsoft – may spend north of $725 billion in combined capital investments this year to build the data centre infrastructure to meet surging demand for AI inference tasks. Component cost inflation contributed to increased budgets.
The data centre buildout opportunity is expanding in 2026, and power transformers and power-quality gear are part of the primary bottlenecks the AI industry is battling. At the heart of this AI infrastructure boom is a quiet titan of the power components industry: Hammond Power Solutions (TSX: HPS.A).
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The $725 billion tailwind
The global data centre market is accelerating at a pace that has blindsided even the most bullish analysts. In early 2026, projections for hyperscaler capital expenditure hovered around US$650 billion. However, following the Q1 2026 earnings season, that figure has jumped to $725 billion, with some estimates for the “Big Five” (Amazon, Microsoft, Google, Meta, and Oracle) now reaching as high as $805 billion.
Data centres are notorious “power hogs,” requiring specialized electrical equipment to step down high-voltage grid power into the precise levels needed for sensitive server racks. This is where Hammond Power Solutions enters the frame.
Hammond Power Solutions (HPS) stock rides the AI data centre wave
Hammond Power Solutions has seen its dry-type transformers and power quality products sell hotly as the data centm buildout gains momentum. The Canadian AI growth stock’s trajectory is explosive. In its Q1 2026 results released Tuesday, May 5, HPS reported record quarterly sales of $265 million, a 31.5% increase year over year. Gross margins expanded sequentially from 29.2% to 30.1% despite nagging tariff impacts as the company manages cost pressures and improves factory overhead absorption at its recently constructed Mexico facility. Adjusted earnings per share for the quarter increased by nearly 30% to $2.08.
“HPS delivered a strong first quarter, with record sales driven by continued strength in the U.S. and Mexico, particularly in custom product shipments and data centre-related activity,” noted CEO Adrian Thomas in Tuesday’s earnings release. He highlighted that while standard product sales are healthy, they are being outpaced by higher-margin custom products designed specifically for the rigorous demands of AI-ready data centres.
Most impressively, Hammond Power’s order backlog has surged by nearly 95% year-over-year, driven almost entirely by large-scale projects in the data centre space. New project wins are larger, and capacity is becoming a significant bidding factor for new business.
Management is already considering new facility builds to meet strong customer demand, but it may be two years before new facilities come online.
Is HPS stock a buy right now?
Hammond Power Solutions stock is still in steady growth mode. New investors could ride its revenue and earnings growth wave as the company executed towards a long-term revenue target of $1.7 billion by 2029. With a forward P/E around 27, HPS stock could still be fairly valued given a forward price-earnings-to-growth (PEG) ratio of 1.1.
That said, it’s up more than 80% year-to-date and HPS stock has surged to new all-time highs. Consolidation could be likely at any point if backlog growth continues to slow down. The backlog, which management doesn’t specify in solid dollar amounts, perhaps due to cancellation risks, grew only 4.1% sequentially during the past quarter, and lumpy orders may be far between as management seeks to expand manufacturing capacity – a process that may take two years to complete.
Hammond Power is set to make a fortune from the data centre build out. I have been bullish on Hammond Power stock as a Buy for 2026, but following its 80% surge, I’m comfortable placing a Hold rating on the growth stock for now as HPS finds sustainable ways to meet data centre customer needs while diluting tariff impacts on its margins.
