Skilled labor shortage caps US data center buildout at 35 GW

A skilled-labor shortage could cap US data center capacity additions at roughly 35 gigawatts annually through 2030, Bernstein Research warned, a bottleneck that favors established turbine suppliers such as Siemens Energy as hyperscalers race to secure generation.

"Tradespeople can't be manufactured, so labor recruitment rates will set the construction pace," Chad Dillard, analyst at Bernstein Research, said.

The US mechanical, electrical and plumbing workforce of about 1.8 million is smaller than the headline suggests, Dillard wrote. Only 30 percent of MEP labor sits in regions where 70 percent of planned projects are located, and the qualified non-residential pool narrows to roughly 790,000 workers. At recent peak rates the US added about 15,000 mechanical, 30,000 electrical and 15,000 plumbing craft laborers a year — a ceiling, Dillard said, because MEP's share of the total labor pool is at a 20-year high and training remains the true bottleneck.

The constraint is a tailwind for Siemens Energy, which booked a record third quarter and a 1-gigawatt data-center order for 20 steam turbogenerators with Babcock & Wilcox. The stock rose 4.12 percent to €165.32 on Wednesday, and analyst targets cluster between €195 and €250, with JPMorgan at €245.

Labor, Not Chips, Is the Binding Constraint

Data centers must compete with other construction for the same tradespeople, Dillard said, and the geographic mismatch is stark: only 30 percent of MEP labor resides where 70 percent of projects will be built. Capacity additions cannot grow materially faster unless labor productivity improves or data centers pull a greater share of workers from the rest of the construction economy, he added.

The essential economy — construction, utilities, agriculture, transportation, oil and gas, and equipment manufacturing — accounts for $12 trillion of US gross domestic product and 95 million jobs, according to industry estimates. The shortage is structural: older workers are aging out, the Gen Z pool is shrinking, and shop-class training largely disappeared from schools decades ago.

Siemens Energy Captures the Power Gap

The labor ceiling plays into the hands of turbine makers because it keeps demand for efficient, rapidly deployable generation elevated. Global gas turbine orders reached 38 gigawatts in the second quarter, up 29 percent quarter-on-quarter and 71 percent year-on-year, with Siemens Energy capturing 12.5 gigawatts versus General Electric's 11.3 and Mitsubishi's 5.3. Lead times have stretched from 3.5 years in 2023 to five years, while costs have climbed 49 percent — evidence of an industry running at full stretch.

Siemens Energy's record third quarter underpins the optimism: earnings before special items of €1.623 billion on revenue of €11.447 billion, order intake of €17.9 billion for a book-to-bill ratio of 1.57, and net profit of €1.19 billion, or €1.28 per share. Siemens Gamesa, the wind subsidiary, posted an operating profit of €75 million — its first profitable quarter since 2022, versus a €438 million loss a year earlier. Danish rival Vestas lifted its annual targets, sending shares up 18 percent after a second-quarter operating margin of 9.4 percent, up from 1.5 percent.

What the Bottleneck Means for Investors

Siemens Energy shares trade 15.39 percent below their April high of €195.38 and 6.55 percent above the 50-day moving average of €155.16, with a year-to-date gain of 35.4 percent. The consensus target sits between €196 and €198, though the range is wide — Barclays at €130 to JPMorgan at €245. If the labor bottleneck caps US buildout as Bernstein projects, the pricing power of turbine suppliers could persist well beyond the current AI capex cycle, supporting the upper end of that range.

This article is for informational purposes only and does not constitute investment advice.