Babcock & Wilcox Faces Legal Storm Over $2.4 Billion AI Infrastructure Deal

Law firms probe $2.4B contract viability as short seller allegations sink stock; 85% of order book hinges on contested deal.

When Babcock & Wilcox unveiled a $2.4 billion design-build agreement to power AI data centers, the narrative seemed tailor-made for the current market frenzy around artificial intelligence. But that growth story is now being tested in court, with multiple US law firms launching investigations into potential securities fraud.

The Pomerantz LLP-led class action, filed in late May, alleges the industrial conglomerate made false or misleading statements about the contract’s viability. Rosen Law has also opened a probe, questioning whether management misrepresented the deal’s true value. At the heart of the dispute are claims that the company failed to disclose conflicts of interest involving major shareholder BRC.

The legal pressure comes after a brutal March for shareholders. A report from short seller Wolfpack Research cast doubt on whether the 1.2-gigawatt project—designed to supply power for AI factories—could ever translate into real revenue. The stock plunged roughly 11.6% in a single session following the allegations.

The numbers paint a stark picture of concentration risk. Babcock & Wilcox’s total order book stands at around $2.8 billion, meaning nearly 85% of that backlog hinges on this single, contested agreement. With the shares trading near $14, the company’s market capitalization has fallen to $1.9 billion, while its price-to-earnings ratio sits deep in negative territory at -16.12.

Yet beneath the legal turmoil, the underlying business is showing signs of operational progress. In late April, the company secured $21 million in contracts for coal-to-gas conversion technologies—modest by comparison but indicative of steady demand in its service and spare parts segment, which benefits from high utilization rates at existing power plants.

Investors now face two critical deadlines. The first is June 15, 2026, the lead plaintiff deadline for joining the class action. The second arrives sooner: Babcock & Wilcox is expected to release first-quarter results in May, with analysts closely watching liquidity levels and debt refinancing plans. Shareholders will also vote on new voting rights rules at the upcoming annual meeting.

The outcome of this legal battle will likely determine whether Babcock & Wilcox can salvage its AI-driven transformation story—or whether the $2.4 billion deal becomes a cautionary tale about the dangers of putting all eggs in one basket.