IES Holdings is interesting to watch for AI data center exposure, but shares are overpriced post-rally with concentrated ownership risks.

Okay, the first stock I wanted to pick today is a company called IES Holdings, and its trading symbol is IESC. So, AES, that's a stock that's been a bit volatile . The stock has risen by as much as 200 % over the past twelve months at its peak.

Currently, the stock is up approximately 68% compared to last year when this video was recorded . Therefore, it significantly outperforms the market even with this decline.

As you know, IES Holdings is not a company familiar to most people. This is a company that dates back to the 1990s. It was then known as Integrated Electrical Services. It was a fairly ordinary company in the field of electrical contracting.

It spent years as one of those small, unremarkable companies with limited trading volume, didn't it? Well, everything changed about a decade ago . Tontine Associates, a company owned by hedge fund manager Jeffrey Jindale, acquired a controlling stake in the business.

They changed the company's name. They rebuilt it around the holding company model , which is essentially a lightweight parent company that owns and oversees a portfolio of independent companies.

In this case, companies affiliated with electrical and mechanical contracting.

Therefore, IES currently operates four sectors. They have a communications business that designs, builds, and maintains network infrastructure and data centers. This includes cables, security systems, and low-voltage networks for commercial complexes and high- tech manufacturing sites.

They have a residential business sector. Historically, this is their largest sector. They install electrical systems, heating, ventilation and air conditioning, plumbing, and even residential solar energy systems.

They have an infrastructure solutions division . It is a business that repairs and manufactures things like industrial engines and generators. Then there is the commercial and industrial sector.

They primarily handle electrical and mechanical contracting for large installations such as wind and solar farms and manufacturing plants. So, IES Holdings is a well-diversified company .

The artificial intelligence angle is an interesting part , especially at this time when artificial intelligence is receiving a lot of attention from investors. Two of the IES sectors I just mentioned, communications and business and industrial, are at the heart of the AI data center building path .

I mean, every large data center that is advertised needs a huge amount of field electrical and mechanical contracting work before it can operate, and that is the kind of work that IES has specialized in for decades.

Of course, for a long time that was for factories and office buildings rather than AI server farms , but as the pace of data center construction accelerated, the number of qualified electrical contractors able to handle this vital work became a real bottleneck.

IES is actually one of a relatively small number of contractors that have the scope, as well as the track record, to win this business.

Therefore, IES does not usually disclose the end owner of the data center whose wiring it is connecting. They are usually hired by a general contractor or developer who is building the facility for a technology company or a cloud company, just to illustrate this subtle difference.

So you won't see a headline like "IES just built Microsoft's newest data center," but they occupy the same place in that supply chain. They are really just one layer under the famous names that undertake the construction work.

To put some numbers into context, their last fiscal quarter was the third quarter of fiscal year 2026, which ended at the end of June. Revenues reached $1.3 billion, an increase of 40% year-on-year.

They announced operating income of approximately $179 million, a 60 % year-on-year increase. Their accumulated business volume has expanded to just under $5 billion. This means a very clear view of future revenues.

Just last month, IES announced that it was acquiring a company called DBM Global. This is a company specializing in steel manufacturing and construction work. The acquisition deal is valued at approximately $650 million.

This represents a completely new area for the company. Which is actually quite interesting.

As you know , IES stock has fallen by about 20% from its recent highs, and much of that is due to the volatility we are seeing among AI infrastructure companies. Some of this is due to market instability.

But this is a company that is run in a disciplined and decentralized manner. They have a proven track record of profitable acquisitions, and they are now benefiting from two of their core businesses being at the heart of the AI data center and energy infrastructure development path.

Therefore, it is an interesting company to monitor. I would point out that the stock is overpriced after its significant rise, even after the recent decline. Ownership is very concentrated with Tontine Associates, which stated that it was a key part of the company's rebranding and restructuring a decade ago .

Therefore, it is something that a potential investor should keep in mind. An interesting business to follow. That is IES Holdings.

This company, as you mentioned, helps in building these data centers, although you don't hear the name of the direct client because they often work as subcontractors. But in one of the recent conferences I was reading about, they emphasized that they work inside data centers.

You talked about that here, Rachel, as the biggest market is the telecommunications parts in these centers. Within this market, they provide structured cables, fiber optic cables, and things like distributors and antenna systems.

But one of the direct questions to management during that conference was about why fiber optic installation had increased nearly 10-fold over the past four years. This is exciting for them, of course, because they are now able to offer more services and solutions.

But currently, data centers have moved away from point-to-point copper network switches and are moving more towards the field of optics, where they clearly need the ability to transmit data much faster.

So it's great to see names that aren't followed by many people, and unfortunately, this is a company that doesn't issue press releases. Or you might say, "I have just finished building a data center for this company or that."

But these types of AI infrastructure and capital expenditure don't just go to graphics processing units or memory companies. It also goes to those who help these companies develop these massive data centers as well.