Hello, Reader.

In a world of record-high stock prices, the hydrogen sector has become a conspicuous outlier. Most of the stocks in this out-of-favor industry are scraping along the bottom, near all-time lows.

However, there’s hope on the horizon…

The AI-inspired data center construction boom might help turn the tide in the hydrogen sector – and accelerate the path toward prosperity.

As most readers are well aware, the accelerating growth of artificial intelligence is fueling unprecedented demand for the computational power and storage that data centers provide. This demand has become so acute that a worldwide data center building boom is underway.

As the data center boom proceeds, the tech industry’s voracious appetite for electric power will grow exponentially. Hydrogen could play a major role in satisfying part of that appetite.

In 2022, data centers accounted for approximately 1.3% of global electricity demand. But according to Goldman Sachs, AI technologies will boost data center power consumption 160% by 2030. At that point, data centers would consume more than 8% of U.S. electric power, and more than 4% of the world’s electric power.

Because of this astonishingly large and rapid growth rate, Goldman Sachs says U.S. utilities will need to invest about $50 billion in power generation capacity.

However, that forecast assumes no change in the data center power paradigm. In other words, it does not account for alternatives like hydrogen fuel cells (HFCs). Perhaps, utilities will not spend $50 billion, because data centers pivot toward other solutions.

Historically, data center server farms have tapped into the local electricity grid for primary power, and then used diesel or natural gas generators for backup power. Since data center downtime can be costly, most center operators used these tried-and-true backup systems, rather than experiment with alternatives like HFCs.

Recently, however, the leading builders of these “hyperscale data centers – like Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), and Alphabet Inc. (GOOG) – have taken steps to replace diesel generators with alternate sources… hydrogen fuel cells being one of the leading solutions.

Partly, the hyperscalers are moving toward renewables like hydrogen to reduce their carbon footprints. Alphabet CEO Sundar Pichai, for example, has stated emphatically that his company will power its entire information empire with carbon-free energy by 2030.

But data center operators are not only seeking cleaner energy technologies; they are also seeking superior energy technologies that can do more than simply provide intermittent backup power.

Neither lithium-ion battery stacks nor diesel generators can deliver a comprehensive solution that provides more than backup power. But HFCs can.

These fuel cells generate electricity through a chemical reaction between hydrogen and oxygen. The only byproducts of the process are water and heat. If the source of hydrogen for the generator is green (i.e., produced via water electrolysis powered by renewable energy), lifecycle emissions are close to zero.

Some data center owners have started testing the use of HFCs in place of diesel generators for backup power.

As such, the data center industry is not only a future demand-driver for HFCs, but also a proof-of-concept venue that could raise the public profile of HFCs.

As green hydrogen becomes more readily available, and more data centers install HFC systems, they not only raise the public profile of this technology, but also help accelerate the infrastructure buildout.

There is one company that I believe stands at the ready. It has already installed stationary hydrogen fuel cell systems in 3,000 locations across 46 U.S. states and 34 countries on five continents.

In fact, this hydrogen play is one of my Fry’s Investment Report recommendations, available only to my members. So, to learn more about how to join us, click here.

Now, let’s take a look back at what we’ve covered here at Smart Money over the last week…

Smart Money Roundup

Soft Inflation Data Fuels the Bullish Fire

Thanks to last week’s shocking inflation report, the market is experiencing a massive shift right now. So if you want the opportunity to thrive during the months ahead, you’ll want to make sure you position your portfolio on the on the winning side of this transition. My InvestorPlace colleague Luke Lango dives into the details in this special guest issue. Continue reading here.

You Can’t Earn Your Investing Black Belt Without This Key Move

The stock market, like a sensei, rarely rewards an investment immediately. That’s why patience is such a valuable investment trait… and why it is so essential to prepare for short-term setbacks. So, let’s explore the power of patience – its crucial role in success… and how position sizing helps apply the approach effectively. Plus, I’ll share one of my real-life success stories that could help lead to one of your own. Learn more here.

How I’m 10x-ing My Gains in AI’s “Final Phase”

My colleague Tom Gentile has identified a major shift coming in the AI sector… a pattern he’s calling the “Final Phase” of the AI boom. In this special guest issue, he shares his plan to profit from this Final Phase, and how you could increase your profit potential tenfold. Continue reading here.

AI Will Generate Gains for All Kinds of Energy Stocks

Amid 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 pour their resources into creating newer and bigger data centers. So, let’s dig into how this energy consumption is good news for both renewables and gas producers… and their investors. Read more here

A Look Forward

This week, I’ll continue to dive deeper into big-picture trends that continue to shape my investment outlook.

Obviously, AI is one of the biggest investment stories of the moment, perhaps even of our lifetimes. And it’s a megatrend that I’ve been closely following for a while now.

Right now, in fact, I am keeping my eye on an area of AI research called artificial general intelligence (AGI), in which AI systems are trained to achieve human-like intelligence.

I will present my findings soon in my elite-level service, The Speculator. Although we cannot predict exactly how AGI will impact our world, we can begin taking certain steps to help “futureproof” our portfolios for what lies ahead.

That said, as AI advances, I do believe that part of our investment focus should be toward what AI is not – a concept that I will explore in a Smart Money report later this week.

Stay tuned!

Regards,

Eric Fry