AI Needs More Power Than the Grid Can Give, and These 7 Stocks Sell the Fix

The rapid growth of artificial intelligence (AI) data centers is outpacing the availability of electricity to power them, according to Morgan Stanley analysts. By 2028, the United States alone will face a 32-gigawatt electricity shortfall due to this surge. This trend has been ongoing since the launch of OpenAI's ChatGPT in November 2022, which ignited a global AI arms race.

Goldman Sachs forecasts that demand for power in data centers will grow by 170% between 2023 and 2030, up from a previous five-year growth estimate of 117%. Utility companies stand to benefit from this growing electricity shortage. Among the best-positioned utility companies are Constellation Energy (CEG), NextEra Energy (NEE), and Vistra (VST), due to their existing nuclear power plants that can be quickly upgraded.

Microsoft and Google have partnered with Constellation to restart idle nuclear reactors and purchase power from their nuclear facilities, respectively. Vistra and NextEra Energy are also engaging in nuclear power supply agreements. Some data center owners/operators, however, are opting to generate their own electricity near their facilities.

General Electric Vernova (GEV) manufactures natural gas turbines that are being installed adjacent to data centers to supplement power. Bloom Energy (BE) is another unique player in the field, leveraging fuel cells to provide electricity for buildings. These fuel cells convert a gas like hydrogen or natural gas into electricity using an electrochemical process, offering minimal long-term maintenance costs and increasingly offering electricity generation as a service.

Other companies benefiting from the AI data center boom include Eaton (ETN) and Vertiv (VRT), which manufacture cooling equipment and energy management solutions, respectively. These advancements are expected to double the worldwide data center power management equipment market size between 2024 and 2035.