A top Morgan Stanley fund manager has identified a stock that could potentially benefit from the increasing power demands of artificial intelligence (AI).
What Happened: Aaron Dunn, who manages the Morgan Stanley U.S. Value Fund, has highlighted the growing power needs of AI as a potential investment opportunity in the utility sector, reported CNBC.
Dunn pointed out that the "next big bottleneck" for hyperscalers, who are major players in cloud computing for AI applications, will be power or fiber. He believes that the power needs of AI and the data center and cloud compute environment could be the next hindrance to their growth.
Identifying utilities as a potential investment, Dunn specifically named CMS Energy Corporation (NYSE:CMS) as a stock to watch. He emphasized the company's focus on renewable energy, which aligns with the green energy initiatives of many hyperscalers.
Another stock Dunn mentioned was Emerson Electric (NYSE:EMR), which he believes also has a favorable opportunity for solid earnings growth.
Bank of America's estimates reveal that Nvidia's AI servers alone have consumed electricity equivalent to that of approximately 20 million homes in the United States. Data centers, crucial for handling extensive computing power required for AI tasks, currently account for 1% to 2% of global electricity usage, as reported by BofA.
Why It Matters: The increasing power needs of AI have been a recurring theme in the tech and energy sectors. As AI's impact on electricity markets is expected to grow, companies are looking for ways to meet these demands sustainably. This has led to a surge in interest in renewable energy and even nuclear power as a potential solution.
Investors are also taking note of the potential opportunities in sectors affected by AI's growth. As M&A activity is expected to rise in 2024, the energy sector, particularly in relation to AI, could see increased attention from investors.
Meanwhile, the demand for AI technology is also driving demand for copper and other resources, further impacting the energy and tech sectors.
