Let's step away from our Nvidia (NVDA) obsession for a moment.
According to Morgan Stanley, AI is changing the data center landscape and carving out entirely new avenues for infrastructure demand. This is a hidden investment opportunity that is currently undervalued by Mr. Market.
Under the radar: Power producers.
“There are opportunities in all infrastructure, from power generation to power electronics to data centers, and the growth rate will accelerate,” Morgan Stanley's Stephen Byrd told Yahoo Finance Live (video above).
Generative AI processing performed on graphics processing units (GPUs) typically requires more power given their higher computational requirements. The need for more power is fueling the rapid growth of data centers across the country, putting pressure on the nation's already strained power grid.
“Data centers not only power AI, but they are also the backbone of our industry, commerce, transportation, and health. These are mission-critical infrastructures. It's important that we don't turn off the lights,” Timothy Fox, managing director of ClearView Energy Partners, told Yahoo Finance.
The International Energy Agency (IEA) estimates that global electricity consumption by data centers will jump from 460 TWh in 2022 to more than 1,000 TWh in 2026, roughly equivalent to Japan's electricity consumption. .
Bird said this is a potential boon for power producers like Bloom Energy (BE). He told Yahoo Finance that the fuel cell company is among a group of companies “well-positioned to meet the rapidly growing power needs of GenAI-enabled companies.”
“The stock isn't doing well, but it's the kind of technology that will allow data center developers to get new centers up and running quickly,” Bird said. “Power-up time is critical and has great economic value. Bloom Energy's fuel cells can be deployed in 50 days.”
During Bloom Energy's earnings call last quarter, CEO KR Sridhar told analysts that he saw AI data centers as the “single largest segment” for the company's growth over the next decade. He said he is doing so.
“The sales funnel for this space alone is huge, not in megawatts but gigawatts,” Sridhar said.
Besides manufacturers of fuel cell generators, other independent power generation companies, including owners of nuclear power plants, are also poised to grow with the construction of upcoming data centers.
Paul Cole, a research analyst at Bank of America, has a strong focus on Constellation Energy (CEG), Public Service Enterprise Group (PEG), Vistra (VST), NextEra Energy (NEE), and Dominion. We believe Energy (D) will be among the “obvious beneficiaries” of the increase. electricity demand.
AI's energy usage has skyrocketed over the past year, but Wall Street experts tell Yahoo Finance that the industry has only scratched the surface when it comes to power consumption.
“In terms of increased power generation, GenAI growth will be around 100% per year for years to come. As the cost of computing declines, new use cases emerge; We're very early in this movement and investors are now looking at what I think is the value chain for powering these data centers. “We're starting to move toward that,” Cole added.
sheena smith Anchor of Yahoo Finance.Look at Sheena every morning Yahoo Finance Live It begins at 9 a.m. ET. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
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