Electrification, offshore wind, and cross-border interconnection are forcing planners to choose between high-voltage direct current (HVDC) and conventional high-voltage alternating current (HVAC/AC). Each path creates different profit pools. HVDC rewards subsea/underground cable capacity and converter expertise. AC favors transformer/switchgear franchises and distribution automation. For investors, blending both exposures can capture the grid capex super-cycle while mitigating permitting and project-specific risk.
Quick Summary
- HVDC dominates long distance, high capacity, subsea, and offshore wind export; AC remains cheapest for short/medium onshore corridors and distribution.
- Winners in HVDC: cable makers (Prysmian, Nexans, NKT), converter/system integrators (Siemens Energy, Hitachi Ltd., GE Vernova, Mitsubishi Electric).
- Winners in AC upgrades: transformer/switchgear leaders (ABB, Schneider Electric, Siemens AG), high-voltage components, and grid automation/DERMS vendors.
- Cross-cycle idea: hold both HVDC “picks & shovels” and AC upgrade franchises to smooth policy/project timing risk.
- KPIs: order intake/book-to-bill, factory loading, project mix (subsea vs land), service share, and execution track record.
HVDC vs. HVAC—When Each Wins
HVDC Usually Wins When…
- Distance is long (hundreds of km) and losses matter.
- Power blocks are large (≥1–2 GW) and point-to-point is acceptable.
- Subsea/underground routing is required (interconnectors, offshore wind export, urban corridors).
- Asynchronous grids must be linked (stability and controllability benefits).
HVAC Usually Wins When…
- Short/medium onshore spans where overhead lines are feasible.
- Meshed networks and multi-terminal interties are desired at lowest cost.
- Distribution and sub-transmission reinforcement (smart transformers, reclosers, voltage control).
Who Benefits? Company Landscape by Segment
A) Subsea & Underground Cables (HVDC-Leverage)
Investment case: Tight global capacity, multi-year orderbooks, pricing power in 525 kV-class lines, installation know-how.
| Company | Ticker | Region | Primary Edge | Typical Project Exposure |
|---|---|---|---|---|
| Prysmian Group | BIT:PRY | Italy | Scale leader in HVDC subsea/land cables and accessories | Interconnectors, offshore wind export |
| Nexans | EPA:NEX | France | Energy-focused portfolio; strong EU footprint | EU interconnectors, offshore wind |
| NKT A/S | CPH:NKT | Denmark | HVDC pure-play orientation in Europe | UK/EU offshore and land HVDC |
| Sumitomo Electric | TSE:5802 | Japan | Subsea cable and accessories | Asia and select EU projects |
KPIs to watch: backlog growth, factory utilization/slots, 525 kV qualification status, marine installation capacity, margin on turnkey vs. supply-only.
B) Converter Stations & System Integration (HVDC Core)
Investment case: High engineering content (VSC/CSC), software control IP, multi-GW program visibility.
| Company | Ticker | Region | Edge | Where It Shows Up |
|---|---|---|---|---|
| Siemens Energy | XETRA:ENR | Germany | VSC converters, European reference base | Interconnectors, offshore hubs |
| Hitachi Ltd. (Hitachi Energy) | TSE:6501 | Japan/Global | Global HVDC leadership, grid controls | EU corridors, offshore export |
| GE Vernova | NYSE:GEV | U.S./Global | Converter packages, grid solutions | UK/EU frameworks, NA corridors |
| Mitsubishi Electric | TSE:6503 | Japan | Converter valves, HV equipment | Asia/EU HVDC programs |
KPIs: order intake vs. converter factory throughput, project mix (offshore vs. onshore), service & digital share, on-time delivery, penalties.
C) Transformers, Switchgear, and Protection (HVAC & Mixed)
Investment case: Bread-and-butter winners of AC reinforcement; also supply HVDC converter transformers and high-voltage gear.
| Company | Ticker | Region | Strength |
|---|---|---|---|
| ABB Ltd | SIX:ABBN / NYSE:ABB | Switzerland | HV equipment, grid automation, converter transformers |
| Siemens AG | XETRA:SIE / ADR:SIEGY | Germany | GIS/AIS switchgear, protection, SCADA/DERMS |
| Schneider Electric | EPA:SU | France | MV/LV gear, digital substations, protection relays |
| Toshiba | TSE:6502 | Japan | Power transformers, HV equipment for AC and HVDC |
KPIs: book-to-bill, service/software mix, pricing power in large transformers, capacity expansions, delivery cycle times.
D) Grid Software, DERMS & Stability (Cross-Theme)
Investment case: Asset-light growth, recurring revenue; critical for renewable integration and demand response.
| Company | Ticker | Region | Angle |
|---|---|---|---|
| Schneider Electric | EPA:SU | France | DERMS/ADMS + substation digitalization |
| Siemens AG | XETRA:SIE | Germany | Grid software, protection & automation |
| ABB Ltd | SIX:ABBN | Switzerland | Grid automation, digital substations |
| Itron | NASDAQ:ITRI | U.S. | AMI/edge control feeding DERMS stacks |
KPIs: ARR growth, utility wins, attach rates with hardware, outage/voltage performance metrics.
E) Marine Installation & EPC Partners (HVDC-Leverage, Project-Cyclical)
Investment case: Optional torque on cable-lay and protection; more cyclical and weather-window sensitive.
| Company | Ticker | Region | Role |
|---|---|---|---|
| TechnipFMC | NYSE:FTI | UK/U.S. | Cable lay/protection, EPC interfaces |
| Subsea 7 | OSE:SUBC | Norway | Cable installation & subsea works |
| DEME Group | EBR:DEME | Belgium | Vessels, trenching, protection |
Regional Angle (Europe vs. North America)
- Europe: Dense pipeline of interconnectors and offshore wind export links tilts returns toward HVDC cables + converters; UK and German corridors are key demand centers.
- North America: Mix of AC upgrades (transformers/switchgear) and selective long-haul HVDC corridors; interties and renewable transmission grow gradually, favoring diversified players.
How to Build Exposure (Model Approaches)
1) “HVDC Core” Basket
- Cables: PRY, NEX, NKT
- Converters: ENR, 6501, GEV, 6503
- Rationale: rides offshore wind export and cross-border links; accepts project timing risk for higher torque.
2) “AC Reinforcement + Digital” Basket
- HV equipment & software: ABBN, SIE, SU, ITRI
- Rationale: smoother order cadence from substations, distribution automation, and reliability programs.
3) “Barbell”
- 60–70% AC/digital stability + 30–40% HVDC torque names to balance execution and permitting risk.
Valuation & Cycle Markers
- Cables/Converters: EV/EBITDA and order-book visibility drive multiples; factory additions and signed EPCs are re-rating catalysts.
- HV Equipment/Software: Mix of mid-teens margins with rising software/recurring share; look for Rule-of-40-like profiles in software-heavy names.
- Cycle turns: watch copper/aluminum pass-through, marine day-rates, converter factory loadings, and grid tender calendars.
Risks & What Can Go Wrong
- Permitting slippage (onshore routes, converter sites).
- Execution/installation windows and weather for subsea campaigns.
- Commodity & component inflation (metals, valves, insulation).
- Policy timing (auctions, corridor approvals) and utility capex reprioritization.
- Competition & price pressure from new capacity entrants.
Long-Term Outlook (2025–2030)
- HVDC: Expansion of multi-GW offshore hubs and meshed grids sustains cable/converter demand; tighter manufacturing slots support pricing.
- AC: Ongoing replacement of aging assets and distribution-level digitalization provide steady, compounding demand.
- Convergence: Hybrid projects (offshore hubs + interconnectors), grid-forming inverters, and DERMS push both camps; winners pair hardware scale with software/service attach.
FAQ
Is HVDC replacing AC?
No. HVDC is expanding for long-distance, high-capacity and subsea routes. AC remains the backbone for meshed onshore networks and most distribution upgrades.
Which stocks are most levered to HVDC growth?
Cables: Prysmian (PRY), Nexans (NEX), NKT (NKT). Converters: Siemens Energy (ENR), Hitachi Ltd. (6501), GE Vernova (GEV), Mitsubishi Electric (6503).
Who benefits if transmission build stays mostly onshore AC?
ABB (ABBN), Siemens AG (SIE), Schneider Electric (SU), Toshiba (6502)—via transformers, switchgear, protection, and grid automation.
How do I track execution risk?
Follow order intake vs. factory capacity, marine vessel schedules for HVDC, converter-site milestones, and service margins (indicate maturity and reliability).
What’s a balanced way to invest in this theme?
Use a barbell: combine HVDC torque names (cables/converters) with AC/digital franchises (transformers, switchgear, grid software) to diversify policy and project timing risk.