Canada’s Data-Centre Boom Needs More Than Chips: This TSX Stock Could Win

AI chips can’t do anything without massive buildings and power infrastructure, and Bird Construction is getting paid to build it.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 4, 5:00 pm EDT

| More on: BDT

Key Points

AI data centres need huge power and construction spending, creating opportunities beyond chipmakers.
Bird is building Bell’s planned 300MW AI data centre and could benefit from more projects in the same rollout.
Bird’s revenue and backlog are surging, but the stock has run up and execution risks remain.

An artificial-intelligence (AI) data centre may be stuffed with some of the world’s most sophisticated chips, but those chips become very expensive paperweights without a building, electricity, cooling, wiring, foundations, and enough grid capacity to keep the whole thing humming.

That physical side of the AI boom could become increasingly difficult to ignore.

The International Energy Agency expects global data-centre electricity consumption to roughly double from 485 terawatt-hours in 2025 to around 950 TWh by 2030. Meanwhile, Canada is trying to capture more of that investment while simultaneously upgrading an electricity system being squeezed by AI, industrial growth, and electrification.

The opportunity goes well beyond semiconductor companies. Data centres can take roughly one to three years to build, according to the IEA. Before anyone starts charging customers for AI computing, billions can flow toward contractors installing electrical systems, mechanical equipment, cooling, foundations, and the buildings themselves.

That’s why I’m increasingly interested in Bird Construction (TSX: BDT).

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies — Source: Getty Images

BDT

Bird is a Canadian construction and maintenance company working across infrastructure, industrial projects, nuclear facilities, mining, energy, healthcare, and increasingly mission-critical data centres.

That last category just became much more interesting. In May, Bell Canada selected Bird as the lead construction partner for its planned 300-megawatt AI data centre in Sherwood, Saskatchewan. The facility expects to provide computing capacity to customers, including CoreWeave and Cerebras. The first phase targets the first half of 2027.

More importantly, this isn’t necessarily a one-building relationship. Bird became Bell’s preferred construction partner under a multi-year agreement covering potential future projects in Bell AI Fabric’s Canada-wide expansion. Bird can provide electrical, mechanical, civil, and systems work. This allows it to collect revenue from considerably more than pouring a concrete slab and waving goodbye.

Investors interested in buying stocks in Canada therefore have a way to play AI spending. All without guessing which chip will win the next benchmark contest.

Into earnings

Bird’s latest results suggest the data-centre opportunity is arriving on top of an already strong construction cycle. Second-quarter revenue climbed 22.6% year over year to $1 billion, marking the first billion-dollar quarter in company history. Adjusted earnings per share increased 40% to $0.70.

Even more important for what comes next, contracted backlog reached a record $6.1 billion, up 30.6% from a year ago. Add another $6 billion of pending backlog ,and Bird had more than $12 billion of combined work in various stages at the end of June.

Margins are improving alongside revenue. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin rose to 7.1% from 6.5%, while management continues to target an 8% margin by 2027. That combination of more work and better profitability on that work is exactly what I’d want to see.

Not exactly cheap

There is one sizeable catch. Around $70 recently, Bird stock more than tripled from a 52-week low near $22. The trailing price-to-earnings ratio has consequently stretched above 60. This leaves little room for construction delays, cost overruns, or slower infrastructure spending.

Construction companies also live with execution risk. One poorly priced project can chew through margins surprisingly quickly. Bell’s future data-centre projects aren’t guaranteed simply because Bird remains the preferred partner, either.

That’s why I’d buy gradually, perhaps using broader weakness during a stock market correction to build the position rather than chasing it in one afternoon.