By Shah Gilani, Shah Gilani – Total Wealth Research, 2024-05-21
There's an unsung hero of the AI sector…
And I'm not talking about semiconductors.
Energy utility companies play a crucial role as the “picks and shovels” of this transformational industry.
Behind every AI application is a massive amount of computational power. Of course, that power comes from energy utility companies.
AI algorithms need a lot of energy to run. They're typically housed in giant data centers that consume huge amounts of electricity. As AI gets smarter and more widely used, the demand for reliable, stable power is only going to grow.
That's great news for the utility sector… and we're already seeing it in earnings reports.
More Power, More Money
Energy giant Southern Company posted a 12% increase in electricity sales to data centers in its Q1 2024 report.
In fact… Reuters reports nine of the top 10 U.S. electric utilities said data centers were a main source of customer growth. That's led many to revise up capital expenditure plans and demand forecasts.
Energy utility companies provide the consistent and robust power supply necessary to keep data centers running 24/7. Without this support, the high uptime and performance standards required by AI applications would be impossible.
But as AI technology advances, the amount of energy it consumes has raised concerns about environmental sustainability.
Energy utility companies are investing heavily in renewable energy sources such as wind, solar and hydroelectric power. Greener energy solution can help reduce environmental impact all that energy consumption.
For tech companies… the benefit is twofold. Renewable energy initiatives not only support their sustainability goals but also improve their public image.
Here's what I mean… many tech giants have committed to achieving carbon neutrality. They rely on energy utility companies to provide the renewable energy credits and sustainable power options necessary to meet these commitments.
This symbiotic relationship highlights the utility companies' crucial role in a sustainable AI future.
Now, utility companies aren't just providing power – they're also using AI themselves.
Smart Energy
They're adopting smart grid technologies, which use AI to predict demand, reduce outages and optimize energy distribution.
This makes the whole system more efficient and reliable, which is great news for everyone who relies on it.
Smart grids use AI to analyze vast amounts of data in real time. That allows for more control over energy flows and faster responses to disruptions. AI-driven energy management is crucial to maintain the high performance and resilience needed by AI-powered systems.
Recognizing their role in the AI ecosystem, many energy utility companies have partnered with tech firms to drive innovation and ensure a steady supply of energy for the AI industry.
These partnerships involve things like joint research projects and investments in renewable energy. And they're mutually beneficial.
I like a handful of utility companies that have already skyrocketed thanks to AI use and power demand… including Constellation Energy (CEG) and NextEra Energy (NEE).
But my absolute favorite “pick and shovel” AI play is a tiny company that holds the key to unleashing the full potential of AI.
Microsoft… Amazon… Google… Intel… are all scrambling to get their hands on this company's products.
