Diesel Engine Maker Cummins Is An AI Stock. Yes, An AI Stock.

Cummins’ Columbus Midrange Engine Plant. The future of the company isn’t only in truck engines. Cummins technology can generate electricity, too. (Courtesy Cummins)

Nvidia and its $4 trillion market valuation seemingly drive the entire stock market these days. The success of its AI chips has Wall Street looking for other ways to play the artificial intelligence boom.

Diesel engine maker Cummins could be one of those ways, according to Citi.

AI data centers use a lot of power, and growth in AI computing has the potential to boost total demand growth for U.S. electricity. The potential for more power generation is a big reason why GE Vernova stock has risen some 300% over the past 12 months, coming into Thursday trading.

GE Vernova sells equipment to utilities. AI data centers can also use power generated on-site. That’s where Cummins comes in.

Wednesday evening, Citi analyst Kyle Menges raised his “out-year” earnings estimates, primarily because of the improving outlook for Cummins’ Power Systems segment. That business builds generators and related products. “We see a solid growth runway for Cummins’ [stationary power business], underpinned by robust data center demand and Cummins’ planned large engine capacity expansion, which is expected to come online in [the first half of 2026],” wrote Menges.

On Tuesday, Cummins reported second-quarter power system sales of $1.9 billion, up 19% from a year ago. Segment earnings before interest, taxes, depreciation, and amortization, or Ebitda, were “also a record at $433 million, rising from 18.9% to 22.8% of sales,” said CFO Mark Smith on Cummins’ second-quarter earnings conference call. Performance was “driven by strong volume, particularly in data center applications and other mission-critical applications, favorable pricing, and a continued focus on productivity and other operational improvements.”

Overall for the quarter, Cummins reported earnings of $6.43 a share. Wall Street was looking for $5.23, according to FactSet.

Menges, for his part, sees 2025 EPS coming in at $21.50, about 30 cents higher than the Street. His old estimate was $21 a share. EPS in 2027 is now forecast at $31.70, up from his prior call of $27.90. Menges is higher than the 2027 consensus estimate of $27.70 aggregated by FactSet.

He rates the shares a Buy and has a $425 price target for the stock. Overall, 35% of analysts covering Cummins stock rate the shares a Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Cummins stock is about $401 a share.

Menges’ estimates and price target value Cummins at about 14 times estimated 2027 earnings. The S&P 500 trades for about 19 times estimated 2027 earnings, according to FactSet.

Cummins stock rose 0.8% on Thursday, closing at $384.61, leaving shares up about 32% over the past 12 months. The S&P 500 and Dow Jones Industrial Average fell 0.1% and 0.5%, respectively, on Thursday.

Write to Al Root at allen.root@dowjones.com