Shares of Generac Holdings (GNRC) surged on Friday after Jefferies upgraded the backup power equipment maker, citing growing momentum in AI-driven data center infrastructure demand and increasing traction for the company’s Baudouin engines among hyperscale operators.
Generac shares climbed 9% after Jefferies raised its rating on the stock to Buy from Hold and increased its price target to $302 from $239.
The new target implies roughly 22% upside from the stock’s previous closing price of $247.79.
The bullish call comes as investors increasingly focus on companies positioned to benefit from accelerating investments in artificial intelligence infrastructure and large-scale data centers.
Jefferies analyst Tanner James said the company could be approaching a key turning point tied to major supply agreements with hyperscale customers.
“Given the continued strong environment for data center development, and potential indications of activity with hyperscalers, we see an asymmetric positive risk/reward setup,” James wrote in a note to clients.
The analyst also pointed to ongoing negotiations involving large backup generator supply contracts that could potentially be announced later this year.
Hyperscaler demand drives optimism
Jefferies highlighted evidence suggesting that Generac’s Baudouin engines are increasingly being adopted within hyperscaler data center configurations.
“Baudouin engines are finding their way into hyperscaler configurations, pointing to market acceptance for a product only GNRC can ably scale,” James said.
The firm noted that Generac had previously disclosed a nonbinding $600 million notice-to-proceed agreement tied to a potential large customer.
Jefferies described the company as being on the “one-yard line” in securing its first major hyperscaler contract.
Part of the optimism stems from permitting documents tied to the “Stargate” AI infrastructure project in Abilene, Texas.
The filings reportedly reference Baudouin engines, which are supplied exclusively in the United States through Generac.
The project has been associated with hyperscaler-backed data center expansion efforts linked to Oracle Corporation.
However, analysts cautioned that the documents do not directly confirm Generac’s involvement in the project.
Still, Jefferies said the filings indicate broader market acceptance of the engine technology among hyperscale operators building next-generation AI infrastructure.
Analysts raise growth expectations
Jefferies now expects Generac to secure two hyperscaler supply agreements over the next three years, potentially driving substantial revenue growth.
The brokerage forecasts the company could generate $6.8 billion in revenue by 2028, exceeding both existing company guidance and Wall Street consensus estimates.
Adjusted EBITDA could rise to nearly $1.5 billion by 2028, according to the firm, supported by growing commercial and industrial demand alongside improving margins.
The upgrade also reflects broader optimism among analysts covering the stock.
According to LSEG data, 13 out of 21 analysts currently maintain either Buy or Strong Buy ratings on Generac shares.
Although Jefferies’ new price target sits above the broader analyst average of approximately $267, several firms have recently increased their targets as enthusiasm around AI infrastructure spending continues to expand.
Generac shares have already risen nearly 91% so far this year.
Residential generator business remains resilient
Jefferies also pushed back against concerns that slowing consumer spending could hurt Generac’s core residential backup generator business.
The brokerage argued that home standby generators are increasingly viewed as essential infrastructure, particularly among higher-income homeowners facing rising concerns around grid reliability and extreme weather events.
The combination of stable residential demand and rapidly growing commercial opportunities tied to AI infrastructure has strengthened investor confidence in Generac’s long-term growth prospects.
As hyperscalers continue expanding data center capacity to support artificial intelligence workloads, investors appear increasingly focused on the companies supplying critical backup power systems required to support those facilities.
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