We need “twice the energy” … it’s not whether to invest, it’s how much to invest … how our experts are positioning themselves … the “hurricane force” tailwind coming
We have to produce massive amounts of energy…
A.I. needs tremendous — literally, twice the electricity that’s available now in our country.
That comes from former president Donald Trump, speaking last Thursday at the Republican National Convention.
We’re still a long way from the November presidential election, and yesterday’s news that President Biden is dropping out of the race and endorsing Vice President Harris throws a wrinkle into the mix.
However, the odds still favor a Trump second term. Given this, it would be wise to take note of his economic agenda – and what that means for your portfolio.
Now, there are all sorts of prospective Trump policies to consider: His determination to “drill, baby, drill” on day one (of a second term) … how he plans to end federal subsidies for electric vehicles … then there’s his desire to “reshore” manufacturing jobs, making the U.S. a global manufacturing leader again … there’s also tariffs, tax cuts, crypto, his hatred of the “Green New Scam” … the list goes on.
But today, let’s focus on Trump’s quote above – the synthesis of AI and energy. After all, whether it’s Trump, Harris, or someone unexpected, whoever takes the White House will still face the same reality…
If the U.S. is to become the global AI leader, it will require a surge of energy capacity – to borrow a Trumpism – “at a level that nobody has ever seen before.”
This makes certain energy and related plays no-brainer investments today. But it’s more than that. The issue isn’t whether to invest – it’s how big do you want to go given the tidal wave of coming demand.
But I won’t try to convince you. The numbers are more persuasive than I could ever be.
We’re not ready for how much energy AI demands
Pop quiz…
Take your normal, vanilla Google search. Imagine however much energy you believe is needed to perform that search.
With that as your comparative baseline, how much energy is needed to run a ChatGPT search?
Ready?
10X.
Now, consider that in 2022, ChatGPT broke records as the AI platform hit one million users in less than a week. Yet by early 2023, that number had exploded to 100 million monthly users.
And this is just ChatGPT.
Consider how many AI interfaces are currently rolling out across the entire global economy … and now consider the related power demand.
Here’s Goldman Sachs:
For years, data centers displayed a remarkably stable appetite for power, even as their workloads mounted.
Now, as the pace of efficiency gains in electricity use slows and the AI revolution gathers steam, Goldman Sachs Research estimates that data center power demand will grow 160% by 2030…
Over the last decade, US power demand growth has been roughly zero, even though the population and its economic activity have increased… But that is set to change.
Between 2022 and 2030, the demand for power will rise roughly 2.4%, Goldman Sachs Research estimates — and around 0.9 percent points of that figure will be tied to data centers.
That kind of spike in power demand hasn’t been seen in the US since the early years of this century. It will be stoked partly by electrification and industrial reshoring, but also by AI.
Data centers will use 8% of US power by 2030, compared with 3% in 2022.
It’s not just here in America. Goldman notes that Europe will require at least $1 trillion to prepare its power grid for AI.
Back to Goldman for an eye-catching statistic:
At the moment, around 15% of the world’s data centers are located in Europe. By 2030, the power needs of these data centers will match the current total consumption of Portugal, Greece, and the Netherlands combined.
Our analysts have already recognized the coming tsunami, and have been urging readers to position themselves accordingly
Here’s Growth Investor‘s quant legend Louis Navellier from an internal roundtable discussion several weeks ago:
What AI is doing to our power grid is scary because we don’t have enough power.
I go between Florida and Reno. In Reno, we have diesel generators every mile in our neighborhoods because the power grid can’t handle the air conditioning load…
You can’t add a new natural gas power plant because the Biden administration passed this law recently that you must sequester the carbon, and that’s an eight-year permit. So, energy is a nightmare in America now.
And so, the companies that are building the grids, as well as better software, are the place to be.
So, we have Louis targeting leading power infrastructure plays.
Next up is our macro expert Eric Fry of Fry’s Investment Report:
Amidst the buzz and bright lights of the stock market’s obsession with artificial intelligence, many investors overlook a crucial factor… The energy sector plays a pivotal role in powering this digital revolution…
The spike in electricity demand due to AI will only continue to increase, especially as tech giants like Google pour their resources into creating newer and bigger data centers…
This massive uptick is likely going to ignite a natural gas boom.
Clearly, Eric likes natural gas as the metaphoric and literal fuel to drive this energy boom.
And here’s Innovation Investor‘s tech expert, Luke Lango:
Data centers [are required] to expand cloud computing capacity to be sufficient to handle numerous advanced AI applications…
Of course, this data center construction boom will also benefit domestic engineering, construction, and building materials firms. But the bigger plays here will be found in the providers of critical data center components, like networking equipment, cooling equipment, virtualization software, and more.
These companies should benefit massively from a domestic data center construction boom.
Luke has zeroed in on the AI data centers and their component suppliers that will be using the energy to service AI applications.
So, what are some actual investment ideas?
For Louis’s infrastructure plays, he’s highlighted EMCOR, Eaton, and Quanta Services.
For Eric’s focus on natural gas, we put a few options on your radar last week. You can begin your research with Cheniere Energy (LNG) – the largest producer of liquified natural gas (LNG) in the U.S. and the second largest LNG operator in the world.
You can also investigate gas-related pipeline stocks such as TC Energy (TRP) which pays a 6.8% dividend yield. There are also gas-related master limited partnerships (MLP) that offer their own hefty dividends.
As for Luke and his focus on data centers and their components, a few options for your research are Iron Mountain (IRM), a REIT specializes in leasing out data center space and secure storage … IHS Holding Limited (IHS), a Britain based telecommunications infrastructure firm … and Applied Digital (APLD), a pure play data center operator.
Let’s take this one step farther before we end
Regular Digest readers know that I lean toward caution.
While I’m quick to urge readers to continue riding today’s bullishness for as long as this market allows, in recent Digests, I’ve pointed toward storm clouds out on the horizon and urged preparation.
But let me provide an alternative perspective on that today.
Yes, the stock market might be in for a correction in the months/quarters ahead. And if your investment timeline or nest egg can’t handle that, please, please be careful and adjust accordingly.
But crashes have happened countless times before, and the stock market has always – always – recovered to reach now highs.
Meanwhile, we’re standing on the edge of a period of technological hypergrowth like nothing we’ve ever seen before. That’s not a Trumpish hyperbole, it is a reflection of exponential progress, which is now hitting the “J” part of its growth curve.
With this in mind, I want to share with you part of an internal email sent from our CEO Brian Hunt to a few members of our leadership team recently. If Brian is a new name for you, beyond helming InvestorPlace, he’s an incredibly accomplished trader and investor.
In his email, Brian started by describing the technological advancements coming, the potential for market volatility, but the even greater potential to make – literally – life-changing wealth over the next five to 10 years.
With that as our context, here’s Brian:
Go long American AI, automation, software, and robotics.
If you want to pick individual stocks or play it with options, you’ll get no objections from me.
If you want to make it simple, easy, and powerful, just look up the five largest AI/robotics ETFs and buy them in equal parts and go to sleep for a while. Maybe throw in some QQQ.
Ignore the corrections. They will be painful but temporary.
This tailwind will blow with hurricane force.
Today, we focused on the tailwind behind AI and energy, but to Brian’s point, it’s coming for the broader tech space
Yes, there will be crashes. Prepare for that.
But if you have a long enough investment window and the mental fortitude to invest, look away for five to 10 years, then go long tech. As I noted at the beginning of the Digest, the issue isn’t whether to invest – it’s how big you want to go.
Don’t overextend yourself… don’t investment more than is wise or appropriate for your specific financial situation… and don’t expect a smooth ride…
But this is going to be a monster moneymaker. Put yourself in position as appropriate.
Have a good evening,
Jeff Remsburg
