Electricity systems are entering a decisive modernization phase. The buildout is twofold: bulk transmission—including HVDC for long-distance and subsea routes—and distribution grid digitalization, where sensors, software, and power electronics orchestrate distributed resources. For investors, 2026 favors a portfolio that mixes long-cycle hardware with visible backlogs and software-rich platforms that convert grid complexity into recurring revenue.
Quick Summary
- 2026 will be a grid year: transmission reinforcements, HVDC links, and distribution digitalization drive sustained capex.
- Software layer matters: ADMS/DERMS, VPPs, grid-forming control push recurring revenue and higher returns.
- Wide-bandgap semis (SiC/GaN), transformers/switchgear, and high-voltage cables remain core “picks & shovels.”
- Blend HVDC torque (cables/converters) with AC upgrade stability (transformers/automation) and WBG semis for a balanced allocation.
- Track order intake, factory utilization, SiC/GaN mix, service/ARR, and milestone delivery on marquee projects.
2026 Market Drivers & Trends
1) Transmission Bottlenecks → HVDC & High-Voltage Reinforcements
Offshore wind exports, cross-border interconnectors, and long-haul corridors underpin multi-year orderbooks for subsea cables and converter stations. Expect continued capacity additions and framework awards.
2) Distribution Digitalization & Flexibility
Utilities scale AMI 2.0, ADMS/DERMS, feeder automation, and non-wires alternatives. Data granularity enables targeted upgrades, lower losses, and monetizable grid services.
3) Power Electronics Everywhere
SiC/GaN devices proliferate in utility-scale inverters, EV charging, data-center PSUs, and industrial drives—lifting system efficiency and shrinking form factors.
4) Reliability & Resilience
Aging transformer fleets, weather risk, and electrification of heat/transport push switchgear, transformers, and protection relays to the front of capex plans.
5) Software + Services Attach
Vendors bundle asset performance management, digital twins, outage analytics, and VPP orchestration, shifting mix toward ARR and improving cyclicality.
Key Technologies for 2026 (and How to Invest)
| Technology | Why It Matters | Primary Beneficiaries (Tickers) | Investor Angle |
|---|---|---|---|
| HVDC interconnectors & export cables | Efficient long-distance/subsea bulk transfer | Prysmian (BIT:PRY), Nexans (EPA:NEX), NKT (CPH:NKT); Siemens Energy (ETR:ENR), Hitachi Ltd. (TYO:6501), GE Vernova (NYSE:GEV), Mitsubishi Electric (TYO:6503) | Backlog visibility; factory slot scarcity; watch book-to-bill & installation milestones |
| ADMS/DERMS & grid automation | Operationalize DER; reduce outages; voltage control | Schneider Electric (EPA:SU), Siemens AG (XETRA:SIE), ABB (SIX:ABBN), Itron (NASDAQ:ITRI), Alarm.com via EnergyHub (NASDAQ:ALRM) | Software/ARR growth; utility renewals; attach rates to hardware base |
| Grid-forming inverters & storage | Stability in low-inertia systems | SMA Solar (FRA:S92), Enphase (NASDAQ:ENPH), ABB (SIX:ABBN), GE Vernova (NYSE:GEV) | Design-win velocity; margin on controls/firmware; fleet performance KPIs |
| SiC/GaN power semiconductors | Higher efficiency & density; 800V EV, data-center PSUs | Infineon (XETRA:IFX), STMicro (NYSE:STM), ON Semiconductor (NASDAQ:ON), Wolfspeed (NASDAQ:WOLF), ROHM (TSE:6963), Renesas (TSE:6723), Navitas (NASDAQ:NVTS), Power Integrations (NASDAQ:POWI) | WBG revenue mix, 200 mm SiC progress, enterprise PSU wins, GM trajectory |
| Transformers, switchgear, protection | Backbone replacements; interface to HVDC | ABB (SIX:ABBN), Siemens AG (XETRA:SIE), Schneider (EPA:SU), Toshiba (TSE:6502), Eaton (NYSE:ETN) | Lead times & pricing power; service mix; inventory turns |
| Passives & thermal (magnetics, capacitors) | Inside every inverter/UPS/charger | TDK (TYO:6762), Murata (TYO:6981), Vishay (NYSE:VSH) | Mix shift to high-rel parts; on-time delivery; content per system |
Regional Outlook for 2026
Europe
- Strong pipeline of offshore wind hubs & interconnectors supports HVDC leaders and marine EPCs.
- Distribution utilities prioritize automation, outage management, and LV analytics as rooftop PV and EV charging scale.
North America
- A blend of AC upgrades (transformers/switchgear) and selective HVDC corridors.
- Data-center power growth favors inverter, UPS, and GaN device suppliers; utilities expand ADMS/DERMS deployments.
Asia-Pacific
- Offshore wind and subsea links expand in Northeast Asia; industrial electrification and EV charging accelerate WBG device demand.
- Mature markets deploy AMI, feeder automation, and storage-enabled microgrids.
Top Public Companies to Watch (by Theme)
HVDC Cables & Converters
- Prysmian (PRY), Nexans (NEX), NKT (NKT) — cable capacity & 525 kV leadership.
- Siemens Energy (ENR), Hitachi Ltd. (6501), GE Vernova (GEV), Mitsubishi Electric (6503) — converter stations & grid systems.
Distribution Automation & Software
- Schneider (SU), Siemens AG (SIE), ABB (ABBN) — ADMS/DERMS, protection, digital substations.
- Itron (ITRI), Alarm.com (ALRM) — AMI, edge control, and residential DER aggregation.
Power Semiconductors (SiC/GaN)
- Infineon (IFX), STMicro (STM), ON Semiconductor (ON) — devices/modules for EV, inverters, charging.
- Wolfspeed (WOLF), ROHM (6963), Renesas (6723) — SiC device/materials depth.
- Navitas (NVTS), Power Integrations (POWI) — GaN power ICs for chargers, data-centers, PV.
Transformers, Switchgear, Passives
- ABB (ABBN), Siemens AG (SIE), Schneider (SU), Toshiba (6502), Eaton (ETN) — core AC backbone.
- TDK (6762), Murata (6981), Vishay (VSH) — premium passives & magnetics.
How to Build a Grid-Modernization Portfolio (2026)
Model 1 — HVDC Core (Higher Torque)
- Cables: PRY, NEX, NKT
- Converters: ENR, 6501, GEV, 6503
- Add a measured sleeve of marine EPC for torque (Subsea 7 — OSE:SUBC; DEME — EBR:DEME; TechnipFMC — NYSE:FTI).
- What to watch: signed EPCs vs. preferred status, factory slots, vessel windows.
Model 2 — AC Upgrade + Digital (Lower Volatility)
- Hardware + Software: ABBN, SIE, SU, ITRI, ALRM
- What to watch: ARR growth, attach rates, large transformer lead times, service margins.
Model 3 — Inverter Efficiency (WBG + Passives)
- SiC/GaN: IFX, STM, ON, WOLF, NVTS, POWI
- Passives: TDK, Murata, VSH
- What to watch: SiC 200 mm yields, data-center PSU wins, EV platform transitions, GM expansion.
Model 4 — Balanced Barbell (Recommended Default)
- 50–60% HVDC Core + AC/Digital leaders
- 40–50% Inverter Efficiency (SiC/GaN + passives)
- Rebalance on backlog conversion (HVDC) and WBG yield/design-win cadence.
KPIs Investors Should Track Quarterly
- Order intake / book-to-bill (cables, converters, transformers)
- Factory utilization & lead times (525 kV cable, large transformers)
- SiC/GaN revenue mix & 200 mm progress (device cost curve, margin path)
- Software/ARR growth and renewal rates (ADMS/DERMS/VPP platforms)
- Project milestones & penalties (converter-site civils, marine campaigns)
Risks & What Could Go Wrong
- Permitting slippage and right-of-way disputes delaying transmission.
- Supply chain constraints (copper/aluminum, converter valves, specialty polymers).
- Yield ramps & packaging bottlenecks in SiC/GaN.
- Weather windows & logistics for subsea installation.
- Policy timing & utility procurement cycles that shift award cadence by quarters.
Long-Term Outlook (2026–2030)
- HVDC remains capacity-constrained, sustaining attractive pricing for qualified suppliers.
- Distribution grids become increasingly data-driven; ADMS/DERMS and VPPs embed as standard capabilities.
- WBG semis become default in high-efficiency inverters, EV, and data-center power.
- Software + services lift margins and smooth cycles.
- Consolidation and vertical integration continue as leaders secure materials, manufacturing, firmware, and installation capacity.
FAQ
Is 2026 better for HVDC or for AC upgrades?
Both. HVDC provides backlog torque from interconnectors and offshore export, while AC upgrades (transformers, switchgear, automation) deliver steadier, lower-beta returns.
Where does software add the most value?
In ADMS/DERMS/VPP platforms that orchestrate DERs, reduce outages, and monetize flexibility—driving higher-margin, recurring revenue.
How do I balance execution risk?
Use a barbell: allocate to HVDC cable/converter leaders for upside, and to AC/digital franchises plus WBG semis for diversification.
Which single KPI is most telling?
For hardware: book-to-bill and lead times. For semis: SiC/GaN mix and yield progress. For software: ARR growth and renewal rates.
What could extend the cycle beyond 2030?
Meshed offshore grids, deeper electrification of heat/transport, AI-driven power density in data centers, and resilience mandates that standardize flexibility at the distribution edge.