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The U.S. industrial automation industry is showing signs of vibrancy in late 2025, fueled primarily by significant technology investments that are beginning to bear fruit.
The sector is a core component of what Merrill Lynch recently highlighted as a “new profit cycle,” driven by domestic manufacturing, infrastructure build-outs, electrification, automation, and not just traditional growth perennials.
Economic issues have also fueled that growth, as labor shortages, grid modernization, and U.S. onshoring are forcing industrial firms to spend aggressively on robotics, controls, power systems, and factory software, among other digital necessities.
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Market mavens also see the macro backdrop changing, with looser Fed policy, elevated fiscal spending, and reshoring incentives creating a durable bid for capital-intensive sectors.
“The Federal Reserve’s easing and fiscal stimulus support a wider range of sectors,” said Paul Holmes, an analyst with BrokerListings. “There’s merit to the ‘asset-lite era’ thesis, as companies with lower fixed costs can sustain above-average valuations.”
Other market experts see Merrill’s new profit cycle call as an emerging reality on Wall Street, especially from an operational standpoint.
“Companies are prioritizing domestic manufacturing and infrastructure because they want operational strength, not hype,” said Mike Fullam, CEO of Togo Supply Chain Resource Group. “These investments reduce risk and improve execution. Growth isn’t vanishing, but companies with stronger operational foundations are better positioned to scale.”
Marcello Lo Cicero, co-founder of React Power Solutions, puts it even more bluntly: “We’re seeing a capex shift from ‘growth at all costs’ to mission-critical automation, grid upgrades, and power resiliency. These projects are necessity-driven and they support steadier margins than ad-driven tech cycles.”
Additionally, cash is a powerful market incentive, as over a trillion dollars in federal infrastructure and clean-energy incentives are filling up industrial order books. “Reshoring is real,” said John Murillo, chief business officer at B2Broker. “Manufacturing construction is running at twice the 2019 pace, and labor shortages and cybersecurity needs are pulling automation demand forward fast.”
With a rising profit cycle in play, market experts see these sector companies among the strongest automation buys for 2025.
ABB Ltd. (OTCPK:ABBNY)
Trading at $668 and up 12.2% for the year, Zurich-based ABB offers investors broad exposure to some of the most prominent themes in global manufacturing, including robotics, motion control, grid efficiency, and data-center electrification. The company also benefits from grid and data center buildouts and has a deep robotics portfolio, with steady global leadership.
“ABB’s breadth across motion, robotics, and power management positions it well for factory automation and energy efficiency,” Lo Cicero said.
Trading at $354 right now and up 6.8% year to date, Dublin-based Eaton is quietly building a robust case for its stock. Eaton isn’t exactly a pure-play robotics company, but it’s becoming one of the most critical “picks and shovels” suppliers for the AI and data center boom. The company also benefits as power management has emerged as a bottleneck across hyperscale computing and industrial electrification.
That’s just for starters. Being a global electrical infrastructure leader and a big beneficiary of data-center power demand has also fortified ETN’s financials. Add to the mix a strong backlog visibility from grid upgrades, exposure to EV charging, resilience, and reshoring facilities, and a respectable 1.04% dividend payout, and Eaton keeps looking better.
Just ask Holmes, who notes that Eaton is “critical for AI data centers and reshoring facilities.” At the same time, Murillo highlighted its “pricing power, electrification exposure, and more reasonable valuation relative to automation peers.” All of the above make Eaton a good market call for 2026.
Rockwell Automation (NYSE:ROK)
Trading at $388 per share and up 32.2% for the year, Milwaukee-based Rockwell could be the closest thing the U.S. has to a pure-play automation champion. The industrial automation and information services provider is a major player in key markets like factory automation, industrial AI, controls, sensors, and lifecycle automation services.
Operationally, ROK tends to build and sustain customer relationships for the long haul, which is always a good sign when kicking the tires on a stock. The same goes for its business partnerships, where Rockwell excels in industrial AI and factory software partnerships.
Market experts are high on the stock, with Lo Cicero calling Rockwell “a high-mix automation leader.” At the same time, Murillo noted that “intelligent devices, robotics and industrial AI are seeing a real push, and Rockwell is leaning hard into those markets.”
Across robotics, energy management, and factory software, the industrial automation space is shifting from cyclical to structural, driven by reshoring, labor tightness, grid upgrades, and massive federal incentives, as the MerrillLynch report noted.
“From a supply chain perspective, Merrill Lynch’s new profit cycle is logical,” Fullam said. “Investments in industrial automation create repeatable, measurable profit opportunities by curbing risk and gaining better business outcomes. That’s why I agree with Merrill that growth may take a back seat in 2026 because companies with stronger operational foundations are better positioned to navigate risk and operate efficiently.”
For investors, the message is clear: an unexpected emerging profit cycle is underway.
“Profits are flowing toward companies that make physical production smarter and more secure,” Murillo noted. “A blend of automation, software, specialty materials, and infrastructure equipment could be an optimal way to tap into this new cycle.”
Editorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.
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