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The risk of underspending on artificial intelligence could be infinitely more detrimental than the risk of overspending on it – that’s currently the consensus among tech executives.

And that’s what may unlock further upside for Eaton Corporation PLC (NYSE: ETN) in 2025.

Eaton stock is up close to 50% year-to-date at writing but famed investor Jim Cramer is convinced it’s not done pleasing its investors just yet.  

AI data centres to serve as a tailwind for Eaton stock

AI data centres require specialized electric components as they need more energy to operate.

Therefore, the Dublin headquartered Eaton could benefit from the global commitment to building such data centres next year as it, among other things, specializes in the said electric components.

That’s why Jim Cramer dubbed ETN a core holding for 2025 in a recent report to his Investing Club.

Eaton stock is currently going 28 times forward versus a five-year average of just over 22.

So, it’s not particularly inexpensive to own at writing – but a 1.10% dividend yield makes up for that drawback.

ETN will benefit from vehicle electrification

Jim Cramer remains bullish on Eaton Corporation as it has a huge backlog of projects that offers tremendous visibility into it expected future performance.

The company already has at least $1.0 billion of mega-projects in the pipeline and is in active negotiations for potential orders worth another $3.0 billion.

All in all, the Mad Money host recommends owning Eaton stock as it offers exposure to all that the world will likely spend on next year: artificial intelligence, electric vehicles, energy transition technologies, digitalization, and infrastructure.

In October, Eaton reported better-than-expected earnings for its third financial quarter. Craig Arnold – the company’s chief executive told investors at the time:

We’re confident in our ability to close the year strong and expect this positive momentum to continue into 2025.

Eaton shares are down about 10% versus its year-to-date high at writing.

Eaton shares could rally to $440

Eaton stock remains attractive also because its management raised the full-year guidance for margins and adjusted per-share earnings in October.

The New York-listed firm now expects segment margins to fall between 23.5% and 23.9% on up to $10.81 a share of earnings (adjusted) in 2024. That’s why Jefferies is super bullish on ETN heading into 2025.

Earlier this month, the investment firm raised its price target on Eaton shares to $440, indicating potential for about a 30% upside from current levels.

Its analysts dubbed the multinational power management company a play on “electrification of everything” and continued growth in data centres in their research note to clients.  

Citi analysts also currently see an upside in shares of this intelligent power management company to $440.

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