Aaron Dunn, a prominent fund manager at Morgan Stanley overseeing the U.S. Value Fund, has highlighted a compelling investment opportunity within the utility sector that could potentially benefit from the increasing power demands driven by artificial intelligence (AI).
Dunn emphasized the critical role of power supply in facilitating the expansion of hyperscalers, major players in cloud computing for AI applications. He pointed out that as AI technologies continue to advance, the demand for power and fiber infrastructure is poised to surge, potentially becoming a significant bottleneck for hyperscalers’ growth trajectory.
In light of this observation, Dunn identified utilities as a promising investment avenue, specifically singling out CMS Energy Corporation (NYSE:CMS) as a stock with potential. He highlighted CMS Energy’s strategic focus on renewable energy initiatives, which aligns closely with the sustainability goals pursued by many hyperscalers in the tech industry.
Additionally, Dunn mentioned Emerson Electric (NYSE:EMR) as another stock with favorable prospects for solid earnings growth in the context of AI-driven power demand. Emerson Electric’s operations and offerings likely position it to capitalize on the evolving landscape of energy consumption driven by AI and data center expansion.
Bank of America’s estimates underscore the substantial electricity consumption associated with AI infrastructure, with Nvidia’s AI servers alone consuming electricity equivalent to that of approximately 20 million homes in the United States. Data centers, essential for supporting the computational requirements of AI applications, already account for a notable portion of global electricity usage, as highlighted by BofA’s findings.
The significance of AI’s escalating power demands extends beyond the tech and energy sectors, with broader implications for investors and industries alike. As AI continues to reshape various sectors, including energy, technology, and finance, investors are increasingly recognizing the potential investment opportunities emerging from this transformative trend.
Moreover, the intersection of AI technology and resource demand, such as the heightened need for copper and other materials, further amplifies the interplay between energy, technology, and investment landscapes. With M&A activity anticipated to intensify in 2024, investors are keeping a keen eye on sectors poised to benefit from AI’s continued proliferation, including the energy sector and related industries.