Investors looking for a unique way to invest amidst the artificial intelligence boom in the stock market have found an interesting investment opportunity — the most traditional utility stocks.
As demand for electricity from AI data centers has increased dramatically, power stocks have become the focus of AI investment.
Previously“Missed the Nvidia train? Wall Street Guiding the Way: This sector is expected to be boosted by AI”,“Outperform S&P and surpass Nvidia? This industry is becoming a new Wall Street favorite”,“Is electricity the next AI beneficiary? Learn how to invest in electricity stocks in one article》As mentioned in many other articles, Morgan Stanley anticipates that the global demand for electricity from generative AI may double. The bank believes that the prospects for the power stock sector may be better, and it has raised the target prices of various power companies.
Judging from the recent performance of electricity stocks, the leading electricity supplier in the US —$Vistra Energy (VST.US)$, America's largest carbon-free nuclear power giant —$Constellation Energy (CEG.US)$, the largest green power company in the United States$NRG Energy (NRG.US)$They also hit new record highs one after another, with increases of 133%, 78%, and 48% during the year, respectively.
overnight$Vistra Energy (VST.US)$It surged more than 9%. This significant increase was mainly due to the company's successful inclusion in the S&P 500 index on Wednesday morning.
According to market opinion, this milestone not only highlights VST's superior position in the field of artificial intelligence-driven electricity demand growth, but also reflects the market's broad recognition of its steady business model, strong technical strength, and future growth potential.
However, it is worth noting that after Constellation Energy's first quarter results were announced, there was a slight correction in pre-market stock prices due to lower operating income than expected.
How much impact will AI have on the growth in electricity demand?
Big tech companies said on this quarter's earnings call that after increasing investment in 2024, they will invest more in artificial intelligence infrastructure in 2025.
Goldman Sachs expects the four technology companies Microsoft, Google, Amazon AWS, and META to invest as much as 177 billion US dollars in cloud computing this year, far higher than the 119 billion US dollars last year, and will continue to increase to 195 billion US dollars in 2025.
Note: Cloud computing capital expenditure of the four major tech giants to 2025 (Amazon only refers to the AWS business), which is the total value of Microsoft, Google, AWS, META, and the four in order from left to right
According to Manju Naglapur, senior vice president and general manager of cloud, application and infrastructure solutions at Unisys, a global technology solutions company,
The demand for electricity in data centers is already huge. Coupled with the hype of artificial intelligence, the demand for electricity has skyrocketed. As more money is spent on data centers, electricity consumption will increase dramatically.
According to new Goldman Sachs research, the surge in power demand due to AI data center operations will bring downstream investment opportunities to the utilities, renewable energy generation, and industrial sectors.
Goldman Sachs predicts that data center electricity demand will grow at a compound annual growth rate of 15% from 2023 to 2030. This growth trajectory is expected to increase the share of data centers in the total electricity demand in the US from about 3% to 8% in 2030.
Goldman Sachs said this trend is expected to drive around $50 billion in US electricity investment in 2030.
Demand for electricity in the US is likely to experience an unseen increase in a generation. Since the beginning of this century, US electricity demand has grown by 2.4% in eight years, while the average annual growth rate of US electricity generation over the past 20 years is less than 0.5%.
By 2030, an additional generation capacity of approximately 47 gigawatts will be required to meet the growth in US data center power demand, which is expected to be met by approximately 60% natural gas and 40% renewable energy.
Wells Fargo also said earlier that after a 10-year electricity growth platform period, electricity demand in the US is expected to increase 20% by 2030. According to the bank,
Artificial intelligence data centers alone are expected to increase electricity demand by about 323 terawatt-hours (1 terawatt-hour = 1 billion kilowatt-hours) in the US by 2030.
Cow friends,
Are you optimistic about the future trend of electricity stocks?
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Editor/Somer