Generative AI's power needs are driving opportunities for investors. Big Tech companies are rapidly building out infrastructure to support the growth of newer, more powerful intelligence models.
Earlier this month, Meta committed hundreds of billions of dollars to building AI infrastructure meant to unlock what the company calls "superintelligence," the next level of generative AI. Companies like Nvidia continue to march higher on the premise that they provide the infrastructure, namely GPUs, for generative AI. Others, like CoreWeave, promise extra processing capacity for growing generative AI demands.
But all of this generative AI processing infrastructure requires electrical power — an industry that Jason Shapiro, founder of Crowded Market Report, sees as an AI adjacent play.
"If the AI story is what's driving all this, we know what the problem is," Shapiro told Investor's Business Daily's "Investing with IBD" podcast. "Where's all this power coming from? If they have to build out all this power, then that's going to be a lot of money going there."
Generative AI's electrical power demands will provide "a good wind at your back" for energy investments, Shapiro says, boosting a sector that hasn't been a strong growth story for decades.
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Shapiro says energy and utility stocks are ignored even by savvy investors focused on the market. He cites breakouts in stocks like energy GE Vernova.
Infrastructure equipment maker provider GE Vernova recently formed as part of the three-way split of General Electric. The separation was intended to help investors better value each individual unit in the context of its own industry, without having to account for the variables of other industries.
In its earnings report on Wednesday, the company beat on both revenue and earnings per share. Demand growth for power and electrification equipment has pushed its backlog out through 2027, so the company is now taking orders for 2028. GE Vernova stock leapt 14.6% on the results during Wednesday trades. The stock remains a top performer in the S&P 500 this year.
Shapiro says generative AI's energy demands make the investment case clear. "Why not be in an industry with the wind at your back?" He cites continued growth in energy through generative AI and infrastructure development from Meta and others, as well as national defense needs.
"I can't see the future, but it seems to be a very hard argument to make that this is going to go away anytime soon," Shapiro said. "They're building these humongous data centers. Something's going to have to power them."
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