Recently, Alex Monk, the stock portfolio manager of Schroder Investments Global Resources, published an article stating that currently, the financial market is paying close attention to industries directly benefiting from artificial intelligence, including large technology and data center companies, as well as companies that provide basic load electricity for power grids. But there are more businesses, including those in the sustainable energy sector, that can benefit from continued structural transformation. Although electrical equipment, renewable energy equipment, and traditional and renewable energy power generation also have impressive future profit growth, the difference in valuation highlights that energy transition stocks are expected to benefit from artificial intelligence growth.

Alex Monk said that after a difficult year, energy transition companies showed strong stock price performance at the end of 2023. Still, energy transition stocks were challenged by unfavorable cyclical factors in early 2024. As inflation continues to exceed financial market expectations, strong economic data, and continued large-scale fiscal spending by governments, thereby driving bond interest rates back to high levels, this has put pressure on the valuation of energy transition stocks. At the same time, profit expectations of major consumer sector companies are sluggish, while some companies are affected by falling electricity prices, which further exacerbates the difficulties faced by the energy transition industry.

Despite short-term challenges, however, initial signs suggest a positive outlook. Demand in the consumption-led market is beginning to stabilize, and the problem of excessive inventory of electric vehicle charging and heat pumps is gradually being mitigated. Residential solar energy companies expect demand to pick up during the year. The fundamentals of the utility-led market are also becoming increasingly clear, demand remains stable, supply chains are returning to normal, and regulators are adapting to the new macroeconomic system. Furthermore, the highly profitable electrical equipment industry and other less cyclical markets cannot be overlooked. As can be seen from the new share buyback and acquisition activities in the energy transition industry, the industry's valuation is still attractive.

Alex Monk also pointed out that the rapid growth of generative artificial intelligence is driving electricity demand faster. The expansion of data centers, increased energy intensity of AI computing requirements, and decarbonized power generation targets have brought extraordinary opportunities for profitable growth to the entire energy transition industry.

To meet the growing energy needs of artificial intelligence by decarbonization, carbon capture cannot be carried out by nuclear power or natural gas alone. This will also require reliance on cheap and readily available sources of renewable energy, including wind, solar, geothermal, hydro, backup energy storage, and e-fuels. Even if gas turbines or nuclear power become the preferred power source for data centers, tight energy markets can drive up electricity bills and benefit sustainable energy suppliers.