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Hello from New York, where we have had another chaotic weekend of politics. Former president Donald Trump was safe on Sunday after another apparent assassination attempt. There are 49 days until the election.
In today’s edition, I report on the latest developments in artificial intelligence and increasing electricity demand. You might recall Simon’s recent piece on the rise of virtual power plants and UK-based Octopus Energy. Today, I look at the companies that could profit from the power-hungry growth of AI.
ESG investing
Electricity providers are ‘next derivative on AI’
As demand for artificial intelligence technologies continues to grow, a new class of companies are starting to emerge as a way to play the sector: electricity providers.
“Investors are looking for the next derivative on AI,” James West, a senior analyst at Evercore ISI on sustainable technologies energy, told me. “The technology investors that are calling us are asking about power.”
“This is the next big bull market, especially as you have some of the other AI derivatives like chips running out of capacity,” he added. Nvidia, the stock market darling of the AI phenomenon saw its shares sink after its latest earnings report in late August. “It is hard for Nvidia to grow earnings further because their capacity tightens,” West said.
If this shift occurs, West said companies that are poised to do well include GE Vernova -the power and renewable energy divisions spun out into a separate company- or Fluence -a battery provider competing with Tesla-.
With data centres’ energy demands accelerating renewable energy development is happening at a rapid scale he said.Renewable electricity generated worldwide in 2025 is expected surpass coal power for first time according IEA.
But that might not be enough.There two broad approaches meeting AI’s rapidly growing power demands experts reckon.One path “re-carbonisation” restarting or maintaining fossil fuel power plants.This path exposes major risk that AI data centres will ultimately drive up carbon emissions.Microsoft’s emissions jumped 30% between 2020 and 2023 largely due data centres its AI development systems company said annual sustainability report this year.
AI data centres demand “99.99% reliable electricity” Thomas McAndrew founder chief executive Enchanted Rock Texas-based microgrid provider told me.This demand strains electricity grids further requires increased reliance existing coal well new natural gas plants he added.AI data centres’ demand causing higher electricity costs residential higher carbon emissions McAndrew said.“Speed power crucial in AI arms race.”
An alternative “re-carbonisation”
But there second path.If technology companies can offset power gaps with natural gas microgrids battery storage then “AI data centres can ease grid pressure provide surplus back grid supporting expansion wind solar thus reducing costs carbon emissions” McAndrew said.
While hardly zero-carbon fuel natural gas used more efficiently reduce emissions fuel data centers KR Sridhar founder chief executive Bloom Energy told me.
Bloom provides back-up energy sources for data centers has been one star portfolio companies Kleiner Perkins blue-chip venture capital firm backed tech giants such Amazon Google.San Jose-based Bloom take heat natural gas energy recycle that power cooling systems for data centers Sridhar said.
If Nvidia other leaders space looking overvalued some investors there options ride wave.Electricity infrastructure companies may not flashy as Nvidia’s semiconductors but they could become an investing theme 2025.
Smart read
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