5 stocks to play in the AI ​​power boom

The United States and the world are experiencing a fourth industrial revolution, with artificial intelligence (AI), clean energy, and cryptocurrencies becoming some of the biggest secular megatrends of our time. According to Goldman Sachs, the growing demand for electricity from AI data centers will create downstream investment opportunities that will benefit utilities, renewable energy generation and industrial sectors. The investment bank projects that data center power demand will grow at a compound annual growth rate of 15% from 2023 to 2030, with data centers consuming 8% of total U.S. electricity generation at the end of the forest compared to ~3% today . Analysts estimate that approximately 47 GW of additional generating capacity will be needed by 2030 to meet growing U.S. data center demand.

“U.S. energy demand is likely to experience growth unlike any other in a generation. Since the turn of the century, U.S. electricity demand has not increased by 2.4% in eight years, with the average increase in annual U.S. energy production over the past 20 years being less than 0.5%.“Goldman Sachs forecast.

The surge in energy demand is expected to be met about 60% by gas and 40% by renewables, leading to approximately $50 billion in capital investments in U.S. generating capacity by 2030.

Goldman Sachs has selected a basket of 16 stocks across sectors including utilities, cleantech, midstream, energy services, industrials and industrial technology that are expected to benefit from the AI-powered data center power boom. Here are our top picks.

Beneficiaries of the increase in power demand:

Vertiv Holdings Limited

Market capitalization: $37.2 billion

Returns within 12 months: 498.4%

Vertiv Holdings Co. (NASDAQ:VRT), together with its subsidiaries, designs, manufactures and provides critical digital infrastructure technologies and lifecycle services for data centers, communications networks, and commercial and industrial environments. This Ohio-based manufacturer of power and cooling equipment for data centers has a strong presence in the market for thermal cooling and power management solutions.

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Bank of America (BofA) recently touted VRT as a real winner in the AI ​​race, highlighting the company’s roughly 300% share outperformance Nvidia company(NASDAQ:NVDA) since the GPU maker released its first-quarter results on May 24, 2023. Since that day, VRT stock has increased 511%.

“Investments in artificial intelligence are not only about graphics processors, but also about power. GPUs require 2-2.5 times more power than CPUs, and the expected power consumption in US data centers under construction is more than 50% of the power currently used by US data centers,” Ohsung Kwon, equity and quantitative strategist at BofA Securities, said in a note on Monday.

Cameco company

Market capitalization: $23.0 billion

Returns within 12 months: 92.1%

Saskatoon, based in Canada Cameco company (NYSE:CCJ) supplies uranium for electricity production. In a sudden reversal of fortunes, the U.S. uranium industry has recently received major federal support. CCJ and its uranium peers are trading higher on news that the U.S. government will ask companies next month to bid on contracts worth as much as $3.4 billion for domestic nuclear reactor fuel. Last month, the Biden administration banned the import of low-enriched uranium (LEU). The ban, expected to be signed by President Joe Biden, will go into effect 90 days after it goes into effect and will last until 2040.

The Biden administration also supports development Advanced small modular reactors (SMRs). According to the Department of Energy, advanced SMRs offer many advantages, such as relatively small physical size, lower capital investment, the ability to be placed in locations inaccessible to larger nuclear plants, and the ability to gradually increase power. SMRs also offer distinct safeguards, security and non-proliferation benefits.

Production capacity additions:

GE Vernova

Market capitalization: $44.1 billion

Returns within 12 months: 25.3%

Established in 2023 after spin-off by General Electric (NYSE:GE), GE Vernova (NYSE:GEV) is an energy equipment manufacturing and services company based in Cambridge, Massachusetts. The company operates in the Energy, Wind and Electrification segments. The company is well positioned to benefit from continued growth trends as a provider of generation assets.

In its first-ever post-spinoff report, GE Vernova reported a wider-than-expected first-quarter adjusted loss of $0.41 per share as demand for natural gas equipment and services was offset by weakness in its wind power segment. The wind power segment declined 40% due to lower demand for onshore equipment, while sales in the power segment increased 6% due to higher gas turbine orders and higher demand for gas power services resulting from outages. The company maintained its full-year revenue guidance of $34 billion to $35 billion and said it expected cash generation to “improve significantly each quarter this year.”

Investment needs in the field of energy infrastructure:

Quanta Services Inc.

Market capitalization: $39.2 billion

Returns within 12 months: 59.3%

Quanta Services Inc. (NYSE:PWR) provides infrastructure solutions to electric and natural gas, renewable energy, communications, and pipeline and energy utilities in the United States and international markets. This specialist contractor is ready to benefit from the increased demand for electricity.

Three weeks ago, Qantas reported Q1 2024 revenues of $5.03 billion, up +13.5% YoY, while Q1 non-GAAP EPS was $1.41, beating the Wall Street consensus by $0.12.

“For the first time in many years, utilities across the United States are experiencing and forecasting significant increases in energy demand resulting from the adoption of new technologies and related infrastructure, including artificial intelligence and data centers, as well as federal and state policies aimed at accelerating the transformation energetic“- the company said in its latest payment request.

Beneficiaries of the industrial supply chain:

Eaton company

Market capitalization: $133.2 billion

Returns within 12 months: 93.4%

Eaton company (NYSE:ETN), a global intelligent energy management company, is poised to capitalize on continued growth in energy demand. In its latest quarterly report, the company announced Q1 2024 EPS of $2.04, a record for Q1 and up 28% from Q1 2023, and revenue of $5.9 billion meant an increase of +7.7% y/y. Segment margins were 23.1%, a record for the first quarter and an improvement of 340 basis points compared to the first quarter of 202. Eaton management raised full-year 2024 organic sales guidance, segment margin, earnings per share and adjusted earnings per action.

“Growth factors such as increased design activity related to megatrends, reindustrialization and infrastructure spending continue to drive demand for Eaton solutions in our markets, and we are confident that our teams will be able to meet increased targets for this year. We benefited from strong growth in our business at the beginning of the year, which resulted in strong order growth in the electrical and aerospace industries and record margins in the segment in the first quarter, said Craig Arnold, president and CEO of Eaton.

Author: Alex Kimani for Oilprice.com

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