BorgWarner Inc.'s (BWA) Pivot to Data Centers May Unlock Re-Rating, Says Deutsche Bank

BorgWarner Inc. (NYSE:BWA) is among the 15 Undervalued Momentum Stocks That Are Taking Off.

On February 12, Deutsche Bank upgraded BorgWarner Inc. (NYSE:BWA) to Buy from Hold and raised its price target substantially from $46 to $82, following the company’s Q4 2025 results. As the reason for the revision, Deutsche Bank believes that BorgWarner is undergoing a “pivotal shift” by entering the AI data center infrastructure market, which could substantially bolster the company’s growth prospects. In its note, Deutsche said:

“BorgWarner’s strategic entrance into the AI data center market, in our view, is a pivotal shift from being a traditional Tier-1 powertrain supplier to a more diversified multi-industrial entity – a move that warrants a valuation re-rate.”

These highly optimistic views followed the company’s February 11 announcement of an agreement with TurboCell, a subsidiary of full-stack data center infrastructure developer Endeavour, to supply a highly modular turbine generator system. The Company expects production to begin in 2027 with a target of 2 GW of initial installed capacity.

According to Deutsche Bank’s estimates, this project could add over $300 million in revenue in 2027. However, the analysts estimate that revenue would be substantially higher than initial estimates if the full 2 GW buildout over the next several years is accounted for.

On a further positive note, margins on this incremental revenue are expected to be in the mid-teens, which should significantly bolster earnings. Deutsche analysts argued:

“The revenue should increment at mid-teens margin to start, suggesting large scale isn’t even necessary for profitability.”

As of February 20, BWA shares are trading 16% below their 52-week high.

BorgWarner Inc. (NYSE:BWA) provides clean and efficient technology solutions for combustion, hybrid, and electric vehicles worldwide. Its products help improve vehicle performance, propulsion efficiency, stability, and air quality.

While we acknowledge the potential of BWA 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.

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