On the cusp of a new Trump administration, an American factory boom is emerging after years of structural decline. Efforts are underway to strengthen domestic manufacturing chains and modernize public infrastructure, just as a vast buildout of data centers also plays out, driving demand for power generation facilities to fuel them. Together, these trends have fueled massive gains for heavy engineering and construction stocks.
Quanta Services, a Houston-based contractor that specializes in energy projects, rallied 53% in the past year and has more than quadrupled over the past four years. Fluor Construction, which is based in Irving, Texas, and handles refinery and liquefied natural gas facility construction, has nearly tripled since 2021. And in Rockville, Md., Argan — which is focused on power and telecommunications projects — more than tripled in the past year alone.
But as these building stocks and peers like Jacobs Solutions and Aecom prepare for the next four years under President Donald Trump, anticipation is mixed with unease.
Call it a slurry of emotions. Construction spending has stalled. U.S. supply chains, while improving, face many challenges. Interest rates remain high while labor and material costs continue to climb. Much of the ballyhooed public infrastructure spending has not yet turned into construction awards or wins, much less shovel-ready projects. Growth areas in the private sector are slowing or shrinking as well.
"We have seen a lot of these projects get delayed because of the cost factors," said Ben Brubeck, vice president of regulatory affairs at Associated Builders and Contractors (ABC). "We have also seen a lot of delays because of the regulatory policies of the Biden administration, which I think Trump is going to undo or fix pretty quickly in the first year."
Still, the volatile construction industry is bracing for the return of an unpredictable president. Trump, who styled himself the "builder president" in his first term, threatened on the campaign trail to "rescind all unspent funds" under the Inflation Reduction Act (IRA), a signature Joe Biden bill. He blames the measure for worsening inflation and for pushing the "green new scam," which has caused solar panels, electric vehicles and hydrogen plants to multiply across America.
Building Stocks Face Uncertainties Amid Factory Boom
That threat spawned worries about whether, and to what degree, Trump might roll back the bipartisan IRA, the Infrastructure Investment and Jobs Act (IIJA) and the CHIPS and Science Act. Those measures contain $2.1 trillion in combined government spending, which is being released gradually into manufacturing and infrastructure projects.
Senior construction industry executives told Investor's Business Daily that they see the risk of an IRA rollback as low. It would require an act of Congress, which will be challenging given Republican's slim control of the House and the infrastructure dollars and jobs flowing into red or purple states.
But Trump's threat didn't help sentiment in the construction industry, where all is not well despite some extremely bright spots.
Get Ready For Trump's Executive Orders On Day One
"It has added greatly to the uncertainty about what will happen," said Ken Simonson, chief economist at Associated General Contractors of America (AGC).
On the plus side for construction stocks, data centers are bustling. The oil and gas industries need infrastructure. Heavy engineering and construction companies like Fluor and Quanta are designing, building and powering those critical facilities for the biggest technology and energy names.
But roughly two-thirds of commercial construction firms in an AGC survey released Jan. 8 said projects have been postponed or canceled, mainly due to increased costs or reduced funding. Less than a fifth (18%) of those firms reported actively working on new federally funded infrastructure projects.
On the private construction side, manufacturing plants for semiconductors and electric cars — major beneficiaries of the recent construction boom — are slowing down, Simonson says
'Builder President' Trump And Infrastructure Spending
The president-elect has vast experience in building skyscrapers, hotels, casinos and golf courses.
"I am the builder president — remember that," Trump said in 2017 during his first presidential term.
His first term set in motion the "reshoring" wave, which brought manufacturing back to the U.S. after the pandemic highlighted risks in global supply chains.
But his "gleaming new roads, bridges, highways, railways and waterways" never quite materialized.
Enter the Biden administration, which pushed through three infrastructure and manufacturing measures that drove the unfolding construction boom.
Now Trump is set to take control again, and to advance the rebirth of U.S. manufacturing. Ahead of his Jan. 20 inauguration, more than half the $1.2 trillion in IIJA funding remains unspent, according to a White House release. Public contractors are itching to see those funds reach the streets.
"That is all going to happen, or at least 50% or more is going to happen, during Trump's administration," Brubeck said.
Cautious Optimism At Heavy Construction Companies
The mood among commercial construction companies remains cautiously optimistic. The new AGC survey showed that contractors anticipate more projects to bid on, looser regulations under Trump and more hiring, offset by worries about his trade and immigration policies.
Contractors remain extremely bullish about data centers and power plants, the survey revealed. Hopes are also high for factories and hospitals in the private sector — but not so much for shops and offices.
Uncle Sam Wants Semiconductors Made In America. The CHIPS Act May Fall Short
In public construction, sentiment is positive across almost all categories, led by water and waste treatment plants, and followed by railways and airports, highways and bridges, and schools and colleges, in that order.
However, contractors fear that some construction categories, spanning alternative energy, infrastructure and manufacturing, "may be vulnerable to the termination of tax credits or direct federal spending or loan support," AGC's Simonson told IBD.
Trump has loudly criticized government incentives for wind turbines and electric vehicles. And in domestic chip manufacturing, he has argued that tariffs, rather than subsidies, are the smart way to promote expansion.
On balance, Simonson said, he expects "a moderately positive year" for construction companies.
Quanta, Fluor Get Boost From Data Centers
More evidence came in January of momentum in building data centers, driven by furious growth in cloud computing, artificial intelligence and cryptocurrency technologies. Both Microsoft and Amazon announced new and ongoing investments in AI data centers.
Among building stocks, Fluor designs and builds data centers for technology companies. Grid infrastructure provider Quanta's new acquisition, Cupertino Electric, installs the powerful electrical systems needed by data centers.
Infrastructure spending has been another major growth driver for Fluor, Quanta and other heavy construction stocks. More wind and solar projects, as well as electric utilities, are outsourcing their needs, driving up demand for heavy engineering and construction services.
Top Construction Stocks To Watch Now
| Company | Ticker | Technical Analysis | 12-Mo. Gain
(as of 1/15 close) |
|
|---|---|---|---|---|
| Argan | AGX | Extended after 1/14 breakout | 277% | Power project services |
| Primoris Services | PRIM | Breakout, 1/17 | 148% | Utilities and energy infrastructure contractor/engineer |
| Construction Partners | ROAD | Basing, below support | 118% | Road builder |
| Sterling Infrastructure | STRL | Basing, below support | 132% | E-commerce, public infrastructure |
| MasTec | MTZ | In buy zone | 112% | Diversified construction services |
| Quanta Services | PWR | Climbing in base | 63% | Energy, utility and pipeline construction services |
Morningstar analyst Krzysztof Smalec expects favorable infrastructure trends to continue in the long run. And he points out that infrastructure spending and manufacturing aren't the only drivers behind the strong runs for construction stocks.
"The companies have improved their operations and boosted their margins," Smalec told IBD. "They have moved away as a group from more cyclical oil-and-gas exposure."
In recent years, "Jacobs, Aecom and Fluor have all moved to higher-margin, more differentiated engineering work" and away from lower-margin construction work, he said. Similarly, they are shifting to reimbursable-cost contracts after cost overruns on fixed-price contracts led to steep losses.
Those strategy shifts have resulted in less volatile and more profitable portfolios, Smalec says.
Relatively speaking, he finds Aecom and Jacobs most favorably exposed to end markets in water and transportation, which have been big beneficiaries of infrastructure spending so far.
Fluor is still a big builder of offshore oil platforms, pipelines and refineries. This could actually work to its advantage in coming years.
In November, Fluor CEO David Constable welcomed "a clear winner" in the presidential elections, while signaling that Trump's victory provides investment certainty for customers.
Technical Analysis Of Construction Stocks
Building stocks have generally pulled back along with the overall market in January. Several are now rising in bases, or pecking out record highs. Quanta stock shows a flat base with a 350.19 buy point, according to MarketSurge chart analysis.
Smaller rival Argan continues to outperform, and is extended after breaking out above a 165.33 cup-shaped buy point. Its relative strength line is making a new high, a sign of strength alongside a breakout and especially positive given the recent market volatility. Primoris narrowly topped an 84.97 buy point in a flat base on Friday.
Investors should be mindful that Argan's average true range, a measure of stock volatility, is over 8. Controlling risk can be hard with such volatile stocks. Investors may want to stick to stocks with ATRs below 7 and, whenever possible, 5 or less.
Sterling Infrastructure rates just below 5. Primoris and Jacobs are under 3, while Fluor ranks a calming 1.4. All four stocks are basing.
Argan: A Leader Among Construction Stocks
Still, Argan is the group's highflier, riding a 12-month gain of 277%.
Argan touts expertise in constructing facilities for natural gas and renewable energy, with both driving significant recent growth. Agnostic about energy sources, Argan can tilt toward oil and gas if wind and solar wilt under Trump, Argan CEO David Watson said in a recent IBD interview.
The company's power customers support AI data centers, EV charging stations and chip fabrication plants, or fabs.
For its latest quarter, Argan reported a 400% surge in earnings per share. It's on track to report earnings more than doubling in 2024 on a 46% jump in sales. Analysts see growth slowing sharply in 2025.
Earnings and sales growth is mostly solid across the construction stocks group. Analysts expect Quanta Services to deliver a 21% earnings jump in 2024, accelerating from a 13% gain in 2023. The company has guided expectations to double-digit earnings growth in 2025, citing higher demand for its services.
Even Jacobs Solutions, a more challenged member of the construction stocks group, is poised for an earnings and sales comeback in the quarters ahead.
Why Is Construction Spending Growth Stalling?
What does the economic data suggest for construction stocks? Construction spending in the manufacturing sector zoomed around 230% between November 2019 and November 2024, according to U.S. Census Bureau data. That helped fuel a 58% jump in total nonresidential construction spending over this period.
But nonresidential construction spending, across the private and public sectors, fell in October and stalled in November. Construction experts blamed bureaucratic red tape, in part.
As Trump's inauguration looms, contractors remain pinched between confidence and concern. The Global Infrastructure Investment Association said the incoming president could reallocate, if not repeal wholesale, infrastructure spending "within existing frameworks."
Trump could, for example, favor oil pipelines and border infrastructure at the expense of electric vehicles and offshore wind. He could nix some IRA provisions to counteract revenue lost to extended tax cuts.
Builders Weigh Trump's Promises And Threats
Brubeck, of Associated Builders and Contractors, says Trump's deregulation agenda should encourage construction growth and get contracts to market faster. Contractors are hoping for the removal of onerous labor rules and a more streamlined permitting process for infrastructure projects.
Trump's tough stance on trade and migration is the biggest worry, ABC's Brubeck and AGC's Simonson agree. Any tariffs on imported lumber and steel, or crackdown on illegal immigrants, could further jack up construction costs. Contractors already struggle to find workers, a fact that has made the construction industry one of the biggest users of foreign-born labor. In AGC's new survey, about six in 10 firms named rising labor costs and worker shortages as their top concerns for 2025.
Construction companies are monitoring those twin issues while anticipating regulatory relief, Brubeck says. "Obviously Trump is a builder. … They are excited about the fact that someone is in the White House, again, who understands how this cycle works."
The AGC and ABC have both sued the Biden administration over a rule imposing labor agreements on federal construction projects.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
