In mixology, a sidecar is two parts brandy, one part orange liqueur, and one part lemon juice, served chilled. In data centers, it's a high-voltage stopgap that just might save the artificial-intelligence buildout. It's made by hard-hat companies, especially Vertiv Holdings, Eaton, and Schneider Electric, and it's part of the reason they trade at ambitious valuations of 31, 28, and 23 times earnings, respectively, compared with historical levels in the mid teens.
Let's run through some basics, including neoclouds, brownfield construction, watts versus volts, and how to not accidentally set off a plasma blowtorch hotter than the surface of the sun. A good place to start is toasters.
A two-slice household toaster draws, say, 1,200 watts for two minutes. If you can't use yours at the same time as the microwave without tripping a circuit, you're demonstrating the primary formula of electric power: power (watts) = voltage x current (amps). In plumbing terms, voltage is like your water pressure, current is the width of your pipe, and power is the amount of water gushing out. Electrically speaking, your appliance limitations might be an amperage problem. Talk to an electrician about upgrading to chunkier wires, or just don't make toast and reheat coffee at the same time.
A standard kitchen outlet is 120 volts, but power transmission lines can carry hundreds of thousands of volts. If you're curious what would happen if you somehow tried to tap directly into one of those with your toaster plug, you'd never make contact. A plasma arc would jump the gap from the power line to the toaster and instantly vaporize the bread, the toaster, and alas, you, at 35,000 degrees. There's an everyday hero of power distribution called a transformer, whose job it is to step down the apocalyptic voltage of transmission lines to the more mildly frightening voltage of homes.
Now picture trying to run 830,000 toasters simultaneously, not for two minutes, but all day, every day. That's roughly the power needed for a next-generation AI factory. It's why hyperscale tech companies are obsessed with electricity right now. To get that kind of power, you have two choices. You can fill your center with wires the size of small tree trunks, which will crowd out valuable computing space, or you can use much higher voltage.
Right now, servers use 54V, stepped down from 480V, the standard main feed for industrial buildings. Nvidia, the AI chip giant, has proposed feeding data centers with 800V of something called direct current (DC), and running it all the way to servers. Semiconductors don't play nicely with the alternating current (AC) used by homes, factories, and power lines. They need DC. The beauty of a high-voltage DC main feed is that you can keep wire sizes smaller, freeing up more computing space, and you can step down the voltage electronically inside each server chassis, without mechanical transformers. And by going with 800V, the standard today for electric cars and utility-scale battery storage, companies can piggyback off engineering breakthroughs already made by those industries.
Barron's covered this coming shift in a June story on transformers, which will still be needed outside data centers to turn the high-voltage AC of utility lines into 800V DC. Solar players Enphase Energy and SolarEdge have shifted their focus to making solid-state transformers for this job. These will use electronics rather than mechanics, and be much smaller and more efficient than traditional transformers. Our story also mentioned three larger industrial players working on solid-state transformers: GE Vernova, Schneider Electric, and ABB.
In the near term, a stopgap is needed. Getting to the native 800V DC of the future will mean rethinking every safety code, circuit breaker, switch, and connection in the data center -- see plasma arcs and the exploding toaster problem for what must be avoided at all costs. Electricians will need specialized training, too. Hyperscale tech companies will lead the way with newly built, or greenfield, data centers.
But right now a lot of the growth in AI computing is coming from what are called neoclouds. Companies like CoreWeave set up AI computing for leasing, and prioritize lightning-fast expansion by converting brownfield sites like idled paper mills into data centers. Those sites already have reinforced concrete floors and the right zoning and permitting, which can save years. But they also have regular 480V AC.
Enter the sidecar. It's an unassuming box that can sit next to servers and convert and step up 480V AC to 800V DC. Using DC can be risky, because its relentless, steady flow doesn't give standard circuit breakers a chance to work. But one of the killer apps of the sidecar is that instead of mechanical circuit breakers it uses electronic ones, which work in microseconds rather than milliseconds, or thousands of times faster than the blink of an eye, and can keep a loose wire from turning a brownfield data center into a supernova.
Companies will pay richly for boxes that keep their servers safe and running, and allow for high density without bulky wires. In a recent report, BofA Securities estimates that data center spending will hit $2.1 trillion by 2028, up from close to $1 trillion this year. It has doubled its forecast in a year. The transition to 800V DC will begin next year with sidecars, BofA reckons. It has Buy ratings on Vertiv, Eaton, and Schneider, recently predicting upsides of 78%, 28%, and 46%, respectively.
Among these, Vertiv has the most exposure to data centers, at 85% of last year's revenue. It sells cooling systems, power supplies, and even prefabricated modular data centers, which can be shipped to brownfield sites on flatbed trucks, and plugged together like Lego blocks. It will also be ramping up shipments of a sidecar called the Vertiv PowerDirect 5000. Expect sidecars to ultimately give way to native 800V DC main feeds, but only after a lucrative decade or so for their manufacturers.
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