Hi, I’m Eve. A lot of readers have expressed interest in my recent posts. I took my MIT Reader article as a starting point to discuss the need to focus on survival – how to preserve what is valuable from our civilization. Sustainability is the “business as usual” illusion that with the right technological tweaks – more solar panels, more electricity, and at most a few hair shirts – we can prevent bad climate change outcomes.
This post shows us that we need to give up hope even further. The idea of accelerating the damage of the biosphere because of AI and cryptocurrency shows that what passes for our civilization isn’t worth saving. But in the meantime, we can play ponies.
Article by Alex Kimani, veteran financial writer, investor, engineer and researcher at Safehaven.com. Oil prices
- Data centers are expected to consume up to 9% of U.S. electricity by 2030, and the surge in demand will require significant investments in power generation and infrastructure.
- This Fourth Industrial Revolution will be a boon for companies in the power sector, the renewable energy industry, and data center equipment providers.
- Goldman Sachs sees $50 billion in investment opportunities in U.S. power generation by 2030.
Over the past few years, dozens of commentators and industry experts have commented on the ongoing The Fourth Industrial Revolution Unprecedented electricity demand growth is expected in the U.S. and globally. Last year, power sector consulting firm Grid Strategies wrote:The era of flat electricity demand is over.” noted that U.S. grid planners — utilities and regional transmission operators (RTOs) — have nearly doubled their growth projections in their five-year demand outlook. Driven by the boom in artificial intelligence (AI), clean energy, and cryptocurrencies, U.S. electricity demand is expected to grow by as much as 15% over the next decade for the first time in decades.
AI in particular is expected to be a major driver of rapid growth in electricity demand: According to the Electric Power Research Institute (EPRI), data centers will consume 9% of the total electricity generation in the United States within the next decade. Currently about 1.5% This is thanks to the rapid adoption of power-hungry technologies such as generative AI. For reference, last year the U.S. industrial sector consumed 1.02 million GWh of energy, accounting for 26% of U.S. electricity consumption.
This prediction may sound bold, but it may be justified. After all, AI servers are power hungry. Digiconomist estimates that a single NVIDIA DGX A100 Server It consumes as much electricity as several US homes combined. Early ChatGPT searches typically consumed 10 times more electricity than Google searches, but this figure is trending upwards. AI tasks typically require much more powerful hardware than traditional computing tasks. For companies in the power sector, the global picture is even more bullish. According to Sreedhar Sistu, vice president of artificial intelligence at Schneider Electric, 4.3GW of global electricity demand excluding China is due to AI, which could grow nearly fivefold by 2028.
Explosive electricity demand growth has a downside. According to the North American Electric Reliability Corporation (NERC), these megatrends are putting strain on the U.S. energy supply, with energy sources struggling to keep up. NERC projects that summer electricity demand in 2024 will reach its highest level since 2016, while winter demand will reach its highest level since at least 2015.
“(bulk electricity system) is now projected to show its highest demand and energy growth rates since 2014, driven primarily by electrification and the projected growth of electric vehicles over this assessment period.NERC writes: According to NERC, resource growth is “It gets harderAs fossil fuel power sources are being phased out,More than 83 GW of generators are planned for retirement by 2033, with more expected to be decommissioned. Generation planning must take into account growing energy demand and grid stability.”
Three stocks riding the AI power boom
Thankfully, there are some big upsides to this boom in AI power.
According to Goldman Sachs, the increased electricity demand from AI data centers will create downstream investment opportunities that will benefit utilities, renewable energy generation, and the industrial sector. GS projects that data center electricity demand will grow at a compound annual growth rate (CAGR) of 15% from 2023 to 2030, with data centers consuming 8% of total U.S. electricity output at the end of the forecast period. Approximately 47 GW of additional generating capacity will be required to meet the growing electricity demand from U.S. data centers by 2030.
“U.S. electricity demand is likely to experience growth not seen in a generation. Never since the beginning of this century has U.S. electricity demand grown by 2.4% over an eight-year period, and over the past two decades, annual U.S. electricity generation has grown on average by less than 0.5%.Goldman Sachs predicted.
The surge in electricity demand is expected to be met by about 60% gas and 40% renewables, spurring about $50 billion in capital investment in U.S. generating capacity by 2030.
Meanwhile, Goldman Sachs’ Wall Street peer UBS predicts that global AI revenues will reach $420 billion in 2027, a massive 15-fold increase from $28 billion in 2022. GS also predicts that infrastructure spending, driven by GPU cloud and other emerging trends, will reach $195 billion in 2027, up from $25.8 billion in 2022. Nadia Lovell, senior U.S. equity strategist for UBS’s global wealth management division, noted that only 5% of companies are using generative AI today, “but we expect monetization to increase over the long term and become a bigger part of the overall growth in AI.”
Here are our top picks for capitalizing on the AI power boom.
Beneficiaries of increased electricity demand:
Vertive Holdings
Market cap: $37.2 billion
12-month return: 415%
Vertive Holdings(NASDAQ:VRT), together with its subsidiaries, designs, manufactures and delivers critical digital infrastructure technology and lifecycle services for data centers, communications networks, and commercial and industrial environments. The Ohio-based data center power and cooling manufacturer has a strong market presence in thermal cooling and power management products.
Recently, Bank of America (BofA) touted VRT as the real winner in the AI race, highlighting how its stock price has outperformed AI by about 300%. NVIDIA CorporationGraphics processing unit maker VRT has seen its VRT (NASDAQ:NVDA) stock soar since reporting strong first-quarter results on May 24, 2023. VRT shares have soared 511% since that date.
“Investments in AI are not just about GPUs, they are about power: GPUs require 2-2.5 times more power than CPUs, and the projected power usage of U.S. data centers under construction is equivalent to more than 50% of the power used in U.S. data centers today.“Orson Kwon, equity and quantitative strategist at Bank of America Securities, said in a note on Monday.
Power infrastructure investment needs:
Quanta Service Co., Ltd.
Market cap: $40.7 billion
12-month return: 55.1%
Quanta Service Co., Ltd. (NYSE:PWR) Providing infrastructure solutions to electric and gas utilities, renewable energy, communications, pipeline and energy industries in the U.S. and international markets, the specialty contractor is poised to benefit from increasing demand for electricity.
3 weeks ago, Qantas report Q1 2024 revenues of $5.03 billion increased 13.5% year over year, and Q1 non-GAAP EPS of $1.41 beat the Wall Street consensus by $0.12.
“Utilities across the U.S. are seeing and forecasting the largest increase in electricity demand in many years, driven by the adoption of new technologies and related infrastructure, such as artificial intelligence and data centers, as well as federal and state policies to accelerate the energy transition.The company said in its latest earnings call:
Beneficiaries of the industrial supply chain:
Eaton Corporation
Market cap: $133 billion
12-month return: 84.1%
Eaton Corporation (NYSE:ETN) is a global intelligent power management company poised to capitalize on sustained increases in demand for electricity. Latest Quarterly ReportThe company reported first quarter 2024 EPS of $2.04, a record for a first quarter and up 28% compared to first quarter 2023, and revenue of $5.9 billion, up 7.7% year over year. Segment margin was 23.1%, a record for a first quarter and an improvement of 340 basis points compared to first quarter 2022. Eaton’s management raised its full year 2024 organic sales, segment margin, earnings per share and adjusted earnings per share outlook.
“Growth factors, including megatrends, re-industrialization and increased project activity linked to infrastructure investments, continue to drive demand for Eaton’s solutions across our markets, and we are very confident in our team’s ability to achieve our targeted increases for the year. We have leveraged strong business growth since the beginning of the year, with Electrical and Aerospace segments seeing strong orders growth and delivering record first-quarter segment margins. Eaton Chairman and CEO Craig Arnold said:
