Nvidia has become a darling in the investment community over the past few years. The semiconductor company developed the chips that are driving the current boom in artificial intelligence (AI). This caused the company’s profits and stock price to skyrocket.
However, Nvidia is not the only beneficiary of the AI boom. Many companies that are or will capitalize on the megatrend currently remain under the radar of many investors.
Quanta Services (NYSE:PWR), Flowering Energy (NYSE: BE)And Brookfield Renewable Energy (NYSE:BEPC) (NYSE:BEP) stand out to a few Fool.com contributors for their AI-driven benefits. Here’s why they think these companies will profit from AI boom.
AI is just one major enabler
Tyler Crowe (Quantum Services): One topic AI leaders haven’t been shy about discussing recently is the strain AI is putting on infrastructure. AI’s computing power and data storage requirements involve massive investments in new data centers, data transmission, and the physical infrastructure needed to make these things happen. The development of all this infrastructure will likely be a major catalyst for Quanta Services, the country’s largest electrical construction contractor. While 40-45% of the cost of a data center is spent on electrical systems, a lot of electrical work will be required in the coming years to expand AI capabilities.
Here’s the thing: AI isn’t Quanta’s only enabler. Between AI, renewable energy, power grid resilience, nearshoring, carbon capture, green hydrogen and the electrification of everything, capital spending on electrical work is going to be massive. Quanta estimates that global capital spending on green energy will need to amount to about $3 trillion per year for the rest of the decade to stay on track to reach net zero emissions.
With so much money spent on electrical work, it shouldn’t be too surprising that Quanta has grown its earnings per share by 25% per year over the past decade.
The big winners in the AI race have yet to be determined, but anyone who wants to compete will have to spend billions to build the necessary infrastructure. Quanta Services wins in this scenario no matter who comes out on top.
The “blooming” demand for clean energy and AI
Jason Hall (Blooming Energy): Demand for electricity is booming as more and more countries electrify. This is driving demand for clean energy, especially as leaders in spending on AI and other accelerated computing initiatives take steps to limit their environmental impact. Another extremely important factor for AI, and for data centers in general, is ensuring that they have uninterrupted access to electricity.
Bloom Energy strives to achieve both of these goals. The company is active in the hydrogen sector and manufactures equipment that converts hydrogen into electricity. This is a valuable process for data centers because hydrogen is an excellent energy storage mechanism, making fuel cells an excellent backup power source as more and more Data centers are built in remote locations where the infrastructure for other backup power generation tools is not accessible. .
This is only part of the appeal. Bloom is also a leader in manufacturing devices that can separate hydrogen from water using electricity, meaning that if you power them with wind or solar energy, you can produce hydrogen. green hydrogen. Since most of the world’s hydrogen is produced by steam reforming natural gas, this is a big step forward for the environment.
Bloom is also seeing strong interest from the tech world, recently announcing a partnership with Quanta Computerand an agreement with Intel to power Silicon Valley’s largest fuel cell-powered high-performance computing data center.
Of course, there are risks with Bloom. It’s a cyclical sector and industrial demand is a little weak at the moment. Bloom passes a plot of money to rise before the rebound, so it is currently losing money. But with a strong balance sheet and strong earnings history, now may be the best time to invest in this clean energy risk/reward bet for AI.
Powering AI
Matt DiLallo (Brookfield Renewable): Data centers play a crucial role in supporting the growth of AI. They house AI chips developed by Nvidia and others to power AI applications. These installations require a lot of energy, even more to run AI applications. For example, AI-based search consumes up to 10 times more energy than a traditional search process.
Tech companies are proactively responding to their growing energy needs by signing long-term power purchase agreements with renewable energy real estate developers such as Brookfield Renewable. For example, the company recently signed a agreement with a tech titan Microsoft develop more than 10.5 gigawatts (GW) of renewable energy between 2026 and 2030. This massive deal is more than eight times larger than the largest power purchase agreement ever signed by a company. This is in addition to the approximately 1 GW of renewable energy that Microsoft has already contracted from Brookfield.
This agreement places Brookfield in a situation strong positioned to deliver more than 7 GW of new renewable energy capacity per year until the end of the decade. These development projectswith other organic growth drivers and acquisitions, is expected to generate more than 10% annual growth in Brookfield’s funds from operations (FFO) per share until at least 2028. This should give Brookfield Renewable the power to increase its high-yielding dividend, which recently hovered around 4.5%, by 5% to 9% per year over the long term.
Brookfield’s AI-powered growth accelerator puts it in a strong position for generate double-digit annualized total returns over the next few years. This high probability of earning high returns makes it a great way to profit from the AI boom.
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Jason Hall holds positions in Brookfield Renewable, Brookfield Renewable Partners and Nvidia. Matt DiLallo holds positions in Brookfield Renewable, Brookfield Renewable Partners and Intel and has the following options: long $30 calls on Intel in January 2025, short $30 calls on Intel in January 2025, short $50 calls on Intel in June 2024 and short $50 calls on Intel in May 2024. Tyler Crowe holds positions within Brookfield Renewable Power. The Motley Fool holds positions and recommends Brookfield Renewable, Microsoft and Nvidia. The Motley Fool recommends Brookfield Renewable Partners and Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft and short calls from $47 in May 2024 on Intel. The Motley Fool has a disclosure policy.
Beyond Nvidia: 3 under-the-radar stocks to take advantage of the AI boom was originally published by The Motley Fool
