48% upside: VST + KKR's $10B AI power deal

Ran the electricity bill this morning. Up again. Somewhere between my kettle and my laptop, a data centre in Virginia is consuming the equivalent of a small city. Somebody has to build the pipes. That's what this issue is about.

The "AI trade" isn't dead...but the smart money is shifting. The most crowded AI trade is obvious: buy Nvidia, buy the hyperscalers, ride the wave. That trade has also already been made — by everyone. What's less crowded, and arguably more interesting, are the companies that have to exist for any of it to work. Power has to come from somewhere. Servers have to be assembled and shipped. The heat from 140-kilowatt GPU racks has to go somewhere. These are bottlenecks, not optional extras.

Three names keep coming up when serious infrastructure investors map the supply chain: Vistra Corp (VST), Dell Technologies (DELL), and Vertiv Holdings (VRT). None of them is a pure-play AI hype story. That's the point. Vistra is a power generator. Dell assembles servers. Vertiv cools them. All three sit at chokepoints in a buildout that Goldman Sachs projects will push US data centre power demand from 31 gigawatts today to 66 gigawatts by 2027. The infrastructure isn't built yet. These companies are building it.

The valuation case isn't that any of these are cheap in an absolute sense. It's that they're cheaper than the narrative demands — and they have order books, contracts, and backlogs to back the thesis rather than promises. Each one is covered below, with the numbers that matter.

That's the potential upside one Seeking Alpha analyst puts on VST using a 12x EV/EBITDA multiple on 2027 EBITDA of $8.1 billion, implying a price target of $220. For a company that posted Q1 2026 revenue of $5.63 billion with a 26.6% operating margin and 20% EBITDA growth year-on-year, the multiple doesn't look stretched. Morgan Stanley kept its Overweight rating and lifted its own target to $212 in May. The median analyst target across eight coverage firms sits at $232.

The most important thing that happened to VST recently wasn't an earnings beat. It was a deal structure. On June 11, KKR launched Helix Digital Infrastructure with more than $10 billion in committed capital to finance AI infrastructure, and named Vistra as the preferred power provider. KKR's infrastructure platform manages over $100 billion in assets. When a firm that size starts building a dedicated AI power vehicle and puts your name on it first, that isn't a press release — it's contracted revenue not yet in any model.

The underlying business is already moving. Q1 2026 revenue hit $5.6 billion, up 43.4% year-on-year. Management has guided for 20.4% free cash flow growth in FY26, before any upside from new power purchase agreements. Long-term PPAs with Amazon and Meta are already signed. The January acquisition of Cogentrix added 5,500 megawatts of gas generation in PJM, ISO New England, and ERCOT — exactly the markets where data centre construction is most congested. Vistra also holds nuclear production tax credits locked through 2032 under the IRA, which effectively floors its revenue on the nuclear side.

The counterargument is real. Insiders have sold heavily in the past six months, nine transactions all on the sell side. Regulatory pressure on co-location deals is building. And the stock is off its highs. But a pullback with this order book and these contract structures is where you pay attention, not look away.

Dell doesn't get the reverence that Nvidia does. It assembles servers rather than designing chips, which apparently makes it less interesting to write about. The numbers from Q1 FY2027 disagree. Revenue came in at $43.8 billion for the quarter, up 88% year-on-year. AI server revenue alone was $16.1 billion, up 757% versus the prior year period. That last figure is the one that tends to stop people mid-sentence.

The backlog is where the medium-term story lives. COO Jeff Clarke reported that Dell closed more than $64 billion in AI-optimised server orders across FY2026, shipped over $25 billion, and entered FY27 with a record $43 billion backlog. It's now sitting on $51.3 billion of AI server orders after booking $24.4 billion in a single quarter. Full-year AI server revenue guidance has been raised to $60 billion for FY2027, up from $50 billion just a few months ago.

The valuation argument is unusual for a company growing this fast. Dell's forward P/E sits around 22x, with a PEG ratio near 0.7 — considerably more sober than the pure-play chip and software names attached to the same AI theme. You're buying a company with a nine-figure order book at a multiple that implies nobody quite believes it yet. The stock surged 32.8% the day after earnings in May. It's still up 242% year-to-date. At some point the scepticism becomes its own opportunity.

Forty-times forward earnings sounds alarming. For most companies it should. Vertiv isn't most companies right now. Q1 2026 net sales were $2.65 billion, up 30%, with 23% organic growth. Adjusted EPS grew 83% year-on-year. Full-year guidance was raised to $13.75 billion in revenue, up 34% versus 2025, with adjusted EPS guided to $6.35 at the midpoint — that's 51% growth over last year's figure. A PEG ratio near 1.0 is very different from paying 40x for a company growing at 10%.

The structural case is the more interesting one. The project backlog has more than doubled to over $15 billion, covering 12 to 18 months of forward revenue at current run rates. AI racks running Nvidia's Blackwell chips draw 120 to 150 kilowatts each. Air cooling stops working at around 15. Liquid cooling is no longer a premium option — it's a physical requirement. Vertiv is one of a handful of suppliers with the scale and the certifications to bid on hyperscaler liquid cooling contracts today. That short list is the moat. The Q2 earnings call on July 29 is the next test. Watch the order book number.

Goldman Sachs: US data centre power demand Demand expected to jump from 31 GW to 66 GW by 2027 — the structural case in one chart. Goldman Sachs

Dell Q1 FY2027 earnings breakdown The quarter where AI server revenue grew 757% year-on-year, explained properly. Blocks & Files

Vistra and the KKR Helix deal Why a $10 billion KKR-backed AI infrastructure vehicle naming VST as preferred partner is more than a headline. Insider Monkey

Vertiv Q1 2026 official results The 136% diluted EPS growth quarter, investment-grade upgrade, and raised full-year guidance — straight from the source. Vertiv IR

US utilities' $1.4 trillion capex plan America's grid operators are spending more on new capacity in the next five years than the previous decade combined. Tech Insider

IEA: energy demand from AI The agency's model projects global data centre consumption grows 15% per year through 2030 — four times faster than all other sectors combined. IEA

Re-reading the Goldman grid report. The line that keeps stopping me: the planned data centre additions in Texas alone in 2027 are individually scheduled to exceed the entire nation's additions in 2025. VST is in Texas. That isn't a coincidence.