Elon Musk stated in April that following a chip limitation phase last year, the AI sector is now grappling with electricity supply hurdles. This revelation mirrors Amazon’s CEO Andy Jassy, who highlighted the current scarcity of energy to sustain new generative AI services.
During the World Economic Forum, Sam Altman from OpenAI underscored the surging energy demands of AI technology, shedding light on the imperative need for increased power supply worldwide.
The Crux of Data Center Expansion
Data centers serve as the core infrastructure of the burgeoning AI landscape, housing essential components like cables, chips, and servers.
Forecasts predict that global data center capital spending will exceed $225 billion by 2024. Nvidia’s CEO, Jensen Huang, emphasized the necessity to construct data centers worth $1 trillion in the coming years to facilitate generative AI innovation.
The International Energy Agency projects that global data center electricity consumption will more than double by 2026 to over 1,000 terawatt hours, a staggering increase demanding significant power resources.
U.S. data center electricity consumption alone is poised to triple by the end of the decade, potentially leading to power shortages without urgent investments in infrastructure upgrades.
The Golden Opportunity in Electric Utilities
Investors seeking an uncharted path into the AI revolution could explore the often-overlooked utility sector, which suffered a setback in 2023 but rebounded in 2024 with a 6% rise.
Utilities such as Constellation Energy, Vistra Energy, and NextEra Energy are expected to achieve a robust 33% increase in earnings per share from the previous year.
NextEra Energy, with a renewable generation capacity of nearly 60 GW, stands to benefit from the escalating electricity demands of data centers, aligning with tech companies’ preference for renewable energy sources.
Recent commitments, like Microsoft backing $10 billion in renewable projects with Brookfield Asset Management and Brookfield Renewable, emphasize the industry’s shift towards sustainable energy solutions.
Embracing NextEra Energy Stock
NextEra Energy emerges as a promising investment choice, boasting the title of America’s largest electric utility through Florida Power & Light Company.
The company’s subsidiary, NextEra Energy Resources, leads in renewable energy generation globally, particularly wind and solar power, with a keen focus on energy storage solutions.
NextEra’s strategic shift towards solar and energy storage aligns with the escalating demands from the data center sector, positioning the company for substantial growth in the renewable energy market.
NextEra Energy foresees a 6% to 8% annual earnings growth through 2026, fueled by renewables and storage opportunities in the U.S. energy market.
With a high-quality utility in Florida and robust renewable energy business, NextEra Energy offers investors a balanced opportunity for stable dividends and substantial growth potential in the renewable energy realm.
NEE stock holds promise, particularly below $75, as a viable investment choice amidst the evolving energy landscape.
