Who Actually Wins from Reshoring

TL;DR

The domestic manufacturing boom is shifting from physical groundbreakings to high-value equipment integration, creating multi-year backlogs for electrical and automation suppliers. While overall factory construction spending has plateaued, providers of power grids, industrial controls, and automated systems are capturing highly profitable, structural demand. This capital surge remains highly localized, favoring advanced domestic infrastructure over legacy international manufacturing.

Physical Construction Consolidates as the Infrastructure Backlog Swells

Physical factory construction spending is entering a consolidation phase, yet the demand for electrical and power systems required to bring these megaprojects online is generating unprecedented multi-year order backlogs. While annual average manufacturing construction spending previously skyrocketed over 200% to a peak average of $235.6 billion, recent quarters have seen a slight downward trend as first-wave projects wind down US Manufacturing Construction Spending Plateaus in 2026 After Historic Surge. Yet, suppliers of critical infrastructure are seeing the opposite of a slowdown, with megaproject starts more than doubling to capture this structural demand Eaton Rides Massive Wave of Data Center and Megaproject Orders in Q1 2026.

"During President Joe Biden — who served from Jan. 20, 2021, to Jan. 20, 2025 — there was a significant increase in manufacturing construction spending in all four years, according to the Census Bureau’s annual average estimates... During Biden’s four years, the annual average rate of manufacturing construction spending jumped more than 200%, from $75.5 billion to $235.6 billion, according to Census Bureau estimates." — US Manufacturing Construction Spending Plateaus in 2026 After Historic Surge (via FactCheck.org)

"Total data center backlog has grown to 228 gigawatts or 12 years of backlog at a 2025 build rates, up from the 11 years in our last update." — Eaton Rides Massive Wave of Data Center and Megaproject Orders in Q1 2026 (via AOL Finance)

This pattern indicates that the physical completion of a factory shell is merely the prelude to a far more lucrative equipment-fitting phase. As heavy industrial and AI megaprojects transition from concrete-pouring to power-provisioning, the revenue is concentrating in the hands of essential grid and power management providers.

What to watch: Whether high financing costs and trade tariffs on inputs like fabricated metals begin to choke off the next wave of megaproject announcements before the current backlog is fully digested.

Automation and Power Controls Capture the High-Margin Reshoring Premium

The ultimate financial winners of the domestic manufacturing transition are not the factories themselves, but the providers of high-margin automation platforms and specialized grid infrastructure that make domestic production economically viable. As trade policies narrow the cost gap between domestic and international manufacturing, automation allows factories to substitute expensive labor with automated processes, driving a rally of approximately 50% in industrial machinery orders Rockwell Automation Proves Reshoring and PLC-Led Data Center Demand in Q2 2026. This automation demand is further amplified by power grid modernizations, plant lifetime extensions, and "behind the meter" generation to support energy-hungry operations Emerson Electric Capitalizes on Grid Modernization and Growth Verticals in Q2 2026.

"Rockwell's Logix platform carries approximately 60% incremental margins on premium gross margins, meaning the data center is not just growing fast, it is growing at above-average profitability." — Rockwell Automation Proves Reshoring and PLC-Led Data Center Demand in Q2 2026 (via Yahoo Finance)

"...we saw sustained robust investment in power, with orders in our Ovation up 41% and ACV in AspenTech’s Digital Grid Management suite up 31%." — Emerson Electric Capitalizes on Grid Modernization and Growth Verticals in Q2 2026 (via Investing.com)

High domestic labor costs mean that simply building factories in the US is a losing proposition without extreme automation. Consequently, the capital expenditure flowing into reshoring is heavily concentrated in software-driven controls and power grid management, yielding highly lucrative incremental margins for the providers of these proprietary systems.

What to watch: How rapidly these industrial automation leaders can scale their software and programmable controller platforms to meet the overlapping demands of both new factories and AI-driven data centers.

The Geographic and Sectoral Divergence of Capital Flow

The domestic manufacturing push is creating a stark divergence in performance, where suppliers heavily exposed to US power grids and advanced technology are thriving while those tied to traditional chemical or international industrial sectors face severe headwinds. Emerson's growth verticals, which include semiconductors and aerospace, surged 22% in the quarter, highlighting how capital is flowing selectively into advanced sectors Emerson Electric Capitalizes on Grid Modernization and Growth Verticals in Q2 2026. However, this momentum is highly localized; while underlying sales in the U.S. grew 9%, sales in China fell by that same percentage due to a weak chemical industry.

"During the first half of our fiscal year, we have seen better than expected growth in the U.S. We expect the strength in the U.S. to continue, and we now expect the U.S. to grow high single digits for the year. This incremental growth is offset by a slower than expected China, which we now expect to be down mid-single digits for the year." — Emerson Electric Capitalizes on Grid Modernization and Growth Verticals in Q2 2026 (via Investing.com)

Reshoring is not a rising tide that lifts all industrial boats globally. Companies with heavy legacy exposure to over-capacitized foreign markets like China are finding their international segments dragging down the record gains they are harvesting from the modernization of the US power grid and domestic aerospace, semiconductor, and life sciences projects.

What to watch: Whether the domestic high-single-digit growth can continue to fully offset international industrial weakness as global trade dynamics fluctuate.

What surprised us

• The industrial grid is the true AI play. We knew reshoring was driving factory demand, but the industrial equipment giants are finding their largest, most profitable backlogs in AI data centers. Eaton's total data center backlog has reached a staggering 228 gigawatts—representing roughly 12 years of backlog at 2025 build rates Eaton Rides Massive Wave of Data Center and Megaproject Orders in Q1 2026.
• Automation carries software-like margins. Rockwell is generating 60% incremental margins on its Logix platform as data centers transition to intensive industrial controls Rockwell Automation Proves Reshoring and PLC-Led Data Center Demand in Q2 2026. This proves that while the "on-shored capacity" itself might struggle with high domestic labor costs, the automation enablers are extracting premium pricing.
• The reshoring trade is a zero-sum geographic battle. Emerson's US sales grew 9% while its China sales fell 9%, dragged down by China's over-capacitized chemical sector Emerson Electric Capitalizes on Grid Modernization and Growth Verticals in Q2 2026. The reshoring story isn't just about domestic gains; it's a zero-sum reallocation of global industrial capital, and broad global industrial giants are getting weighed down by their overseas exposure.

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