Welcome to Extreme Investor Network, where we bring you the latest trends and insights in the world of investing. Today, we’re diving into the realm of artificial intelligence and how it’s reshaping the investment landscape beyond just tech companies.
When it comes to investing in artificial intelligence, the focus is shifting towards industries like real estate, energy, and utilities. The surge in power demand for data centers, fueled by the need to support AI technologies, is creating opportunities for companies providing data center parts. This includes power producers, grid equipment makers, providers of grid technology, and commodity companies tied to materials like uranium and copper used for cabling and electricity networks serving data centers.
Analyst Thomas Thornton highlights the exponential growth in power consumption for U.S. data centers, with expectations of doubling again in the future. The demand for ‘traditional’ data center space remains strong, with AI workloads driving power usage growth at a significant rate. As AI processing predominantly occurs on graphics processing units (GPUs), newer data centers designed for AI are gaining traction.
Bank of America analysts have identified several companies poised to benefit from the increasing power needs of data centers. Caterpillar, known for its engines for back-up power generation, is a top pick in this theme. With a leading position in diesel generator sets installation for data centers and hospitals, Caterpillar is gearing up to meet the rising power demand.
REITs like Digital Realty Trust and Equinix are also capitalizing on the early stages of AI demand growth. While both companies anticipate strong revenue growth, Equinix stands out with strong bottom-line growth, making it a top pick for investors. BofA projects significant upside for both companies in the coming years.
In addition to Caterpillar, Digital Realty, and Equinix, BofA is bullish on companies like Aspen Tech and Eaton in the data center infrastructure and power supply sector. Eaton, in particular, is expected to see further growth due to its strong margin performance and less cyclical portfolio mix.
Energy companies such as Constellation Energy and Dominion Energy are also identified as beneficiaries of the data center and power supply needs driven by AI growth. As demand for generative AI increases, new data centers will need to be built to accommodate training and inference needs, creating further investment opportunities in this space.
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