When investors think about artificial intelligence winners, names like Nvidia Corp. (NVDA), Broadcom Inc. (AVGO) and Micron Technology Inc. (MU) typically dominate the conversation.

Kerrisdale Capital believes investors may be overlooking another AI beneficiary: Regal Rexnord Corp. (RRX).

In a new investment note, the activist investment firm argues the industrial manufacturer has quietly evolved into an AI infrastructure play through its growing exposure to data centers, robotics, industrial automation and aerospace, yet continues to trade at a significant discount to peers. That disconnect, Kerrisdale says, could send the stock more than 100% higher.

Regal Rexnord: Industrial Company To AI Infrastructure Play

Kerrisdale argues that Regal Rexnord today looks very different from the company investors remember just a few years ago.

The transformation began with the acquisitions of Rexnord's Process & Motion Control business in 2021 and Altra Industrial Motion in 2023. Together, those deals expanded Regal's product portfolio and increased its exposure to several fast-growing markets tied to AI and industrial automation.

"Today, Regal has world-leading products that position the company to capitalize on some of the best growth themes in the market: data center, industrial automation, aerospace & defense, and robotics," Kerrisdale wrote.

The investment firm believes many investors still view Regal as a cyclical industrial company, even though its revenue mix has shifted toward higher-growth end markets.

Regal's Data Center Business Is Accelerating

One of Kerrisdale's biggest reasons for optimism is Regal's growing data center business.

The company has supplied switchgear products for more than five decades, and Kerrisdale noted that business has grown at a 30% compound annual growth rate over the past five years. It expects that segment to double over the next two years.

An even bigger opportunity may be Regal's expansion into electrical power distribution modules, or ePODs, which help distribute electricity inside data centers.

Kerrisdale said the rapidly growing ePOD business "is about to drive a powerful financial inflection."

Why Kerrisdale Sees 100% Upside

Beyond AI exposure, Kerrisdale argues Regal's valuation does not reflect its improving fundamentals.

The firm notes the stock currently trades at roughly 11.5 times estimated 2027 EBITDA, a meaningful discount to other industrial companies benefiting from themes such as AI infrastructure, robotics and aerospace.

It also expects a combination of stronger industrial demand, continued margin expansion and ongoing debt reduction to improve investor sentiment.

"We see Regal shares motoring at least 100% higher, with exciting optionality on numerous growth opportunities," Kerrisdale wrote.

If the firm's thesis proves correct, Regal Rexnord may become one of the more overlooked ways for investors to gain exposure to the next phase of the AI infrastructure buildout—without owning another chipmaker.