Powell Industries (POWL) Benefited from Data Center CapEx Spending

Polen Capital, an investment management company, released its “Polen U.S. Small Cap Growth Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the quarter, the strategy returned 21.4% gross and 21.1% net of fees, respectively, compared to a 12.2% return for the Russell 2000 Growth Index. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its third-quarter 2025 investor letter, Polen U.S. Small Cap Growth Strategy highlighted stocks such as Powell Industries, Inc. (NASDAQ:POWL). Powell Industries, Inc. (NASDAQ:POWL) designs, manufactures, and services custom-engineered equipment and systems. The one-month return of Powell Industries, Inc. (NASDAQ:POWL) was -21.84%, and its shares lost 1.58% of their value over the last 52 weeks. On November 19, 2025, Powell Industries, Inc. (NASDAQ:POWL) stock closed at $285.29 per share, with a market capitalization of $3.443 billion.

Polen U.S. Small Cap Growth Strategy stated the following regarding Powell Industries, Inc. (NASDAQ:POWL) in its third quarter 2025 investor letter:

"The top contributors to the Portfolio’s relative performance in the quarter were Bloom Energy, Joby Aviation, and Powell Industries, Inc. (NASDAQ:POWL). Powell Industries makes custom-engineered systems typically geared toward power control systems at large industrial complexes. The company is benefitting from the continuous rise in data center capex spending, as they are a critical supplier of switchgear that takes power off the grid and helps to protect expensive equipment and minimize downtime. Additionally, if we continue to see a trend towards more onshoring of manufacturing in the US, these industrial facilities will require switchgear systems to safely and effectively move electricity around."

Powell Industries, Inc. (NASDAQ:POWL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 27 hedge fund portfolios held Powell Industries, Inc. (NASDAQ:POWL) at the end of the second quarter, up from 23 in the previous quarter. Powell Industries, Inc. (NASDAQ:POWL) reported total revenue of $286 million in the third quarter of fiscal 2025, compared to $288 million in the prior year’s comparable quarter. While we acknowledge the potential of Powell Industries, Inc. (NASDAQ:POWL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Powell Industries, Inc. (NASDAQ:POWL) and shared Carillon Eagle Small Cap Growth Fund's views on the company. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.