JPMorgan's Steve Tusa talks industrials outlook for 2026

Market Overview & Trends - Industrials sector experienced a tale of two halves in the year, with growth focus in the first half and a dramatic divergence in performance in the second half [2][3] - Data center demand is exceptionally strong and increasing, making it a central theme for industrials [4] - Concerns about the sustainability and duration of the data center cycle exist, but on-the-ground activity shows no pause in data center construction [4][12] - Supply is struggling to keep up with demand in the data center buildout, suggesting the cycle is still in its early stages [13] Investment Opportunities - Recommends sticking with AI data center buildout trade, particularly names like Verdivive, which recently entered bear market territory [6][7] - Suggests Johnson Controls as an idiosyncratic margin story with potential for 15-20% earnings growth over the next few years [8] - Favors Dover and DuPont as relatively cheap economic leverage plays [10] Risks & Considerations - Residential HVAC stocks have declined significantly (20-30%) in the second half of the year, but the industry believes it's too early to time a rebound [10] - Discussion of an overbuild in the data center space is premature, as there are no signs of idle GPUs [14]