'Power-hungry' AI Data Centres and the Power Generation Companies to Watch
As artificial intelligence (AI) continues to revolutionize industries, the amount of computational power needed to support the growth of AI is increasing at a rapid pace, doubling approximately every 100 days.
AI and Energy Demand
$Goldman Sachs (GS.US)$ has explored the implications of AI on the demand for global power. The bank's global investment research (GIR) team issued a report that suggests power requirements for global data centers will likely more than double by 2030. This increase is expected to boost the compound annual growth rate (CAGR) of electricity demand in the United States to 2.4%.
Experts predict that from 2023 to 2030, power demand for data centers will grow at a compound annual growth rate (CAGR) of 15%. This growth will lead to data centers accounting for 8% of the total power demand in the United States by 2030, a significant increase from the current figure of approximately 3%.
Analysts expect this to drive about $50 bn of capital investment in US power generation capacity cumulatively through 2030 assume a 60/40 split between gas and renewables," wrote Goldman.
Power Generation Companies to Watch
Based on the recent trends observed in the power sector stocks, key American electricity suppliers have experienced notable gains. $Vistra Energy (VST.US)$, a top electricity provider in the U.S., $Constellation Energy (CEG.US)$, the largest nuclear power plant operator in the U.S., and $NRG Energy (NRG.US)$, the largest producer of green electricity, have each achieved new record highs. To date, their respective stock prices have surged by 133%, 78%, and 48% within this year.
Recent power market developments are certainly notable, and we see multiple drivers underlying a projected long-term acceleration in load growth in many of the geographies we serve," Vistra Chief Executive Jim Burke said Wednesday in the earnings release.
At the end of the fourth-quarter, Burke named data centers as part of the company's growth plans.
During the current surge in AI development, there is a significant demand for energy to operate data centers, which serve as hubs for the training and dissemination of machine learning algorithms that power AI. Nuclear energy is being considered as a solution to meet these energy needs.
Morgan Stanley analyst David Arcaro anticipates that the upcoming conference call will likely concentrate on the possibility of securing long-term agreements with data centers to use power from nuclear plants. According to a note from April 29, Arcaro observes progress in these discussions recently. He predicts that Constellation Energy could potentially finalize contracts with data centers as early as the third quarter.
Discussions with major hyperscalers have progressed to site-level diligence and management previously indicated that potential deals could be possible in months, not years," the Morgan Stanley analyst said. Top hyperscalers — the largest cloud, data center and AI providers — include $Amazon (AMZN.US)$'s AWS, $Microsoft (MSFT.US)$, $Meta Platforms (META.US)$ and $Alphabet-A (GOOGL.US)$.
Source: Investor's Business Daily, CNBC, Investing.com
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