HomeBusiness3 under-the-radar stocks to benefit from the AI ​​boom

3 under-the-radar stocks to benefit from the AI ​​boom

Nvidia has become a darling in the investment world in recent years. The semiconductor company developed the chips powering the current artificial intelligence (AI) boom. That has driven up the company’s profits and stock price.

However, Nvidia is not the only beneficiary of the AI ​​boom. Many companies that are capitalizing on the megatrend or are about to do so are currently floating under the radar of many investors.

Quanta services (NYSE: PWR), Bloom energy (NYSE:BE)And Brookfield Renewable (NYSE: BEPC) (NYSE:BEP) stand out to a few Fool.com contributors for their AI-powered advantage. This is why they think these companies will benefit from the AI ​​boom.

AI is just one important catalyst

Tyler Crowe (Quanta Services): AI leaders haven’t been shy about discussing one topic lately: the pressures on AI infrastructure. The computing power and data storage requirements of AI mean massive investments in new data centers, data transmission, and the physical infrastructure needed to make these things possible. The development of all this infrastructure is likely to be a major catalyst for Quanta Services, the country’s largest electrical construction contractor. When 40% to 45% of the costs of a data center are in the electrical systems, a lot of electrical work will have to be done in the coming years to build out the AI ​​capabilities.

The point is: AI isn’t the only catalyst for Quanta. Between AI, renewable energy, grid resilience, nearshoring, carbon capture, green hydrogen and the electrification of it all, capital expenditure on electrical works will be enormous. Quanta estimates that global investments in green energy will need to reach around $3 trillion annually for the rest of the decade to stay on track to achieve net zero emissions.

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With so much money being spent on electrical work, it shouldn’t be too surprising that Quanta has grown earnings per share at 25% per year over the past decade.

The big winners in the AI ​​race have yet to be determined, but anyone who wants to participate will have to spend billions building out the infrastructure to make this possible. Quanta Services wins in this scenario, regardless of who comes out on top.

The ‘booming’ demand for clean energy and AI

Jason Hall (Flowering energy): The demand for energy is increasing explosively as more parts of the world become electric. That’s driving demand for clean energy, especially as leaders in spending on AI and other accelerated computing initiatives take steps to limit their impact on the environment. Another factor that is extremely important for AI, and for data centers in general, is ensuring they have uninterrupted access to power.

Bloom Energy is working to achieve both goals. The company is involved in hydrogen and makes equipment that converts hydrogen into electricity. This is a valuable process for data centers because hydrogen is an excellent energy storage mechanism, making hydrogen fuel cells an excellent energy backup as more and more data centers are built in remote locations where infrastructure for other backup energy generation tools is inaccessible. .

That’s just part of the appeal. Bloom is also a leader in the production of devices that can separate hydrogen from water using electricity. This means that if you power them with wind or solar energy, you can produce green hydrogen. Since most of the world’s hydrogen is produced by steam reforming of natural gas, this is a big step forward for the environment.

Bloom is also seeing strong interest from the technology world and recently announced a partnership with Bloomberg Quantum computerand a deal with Intel to power Silicon Valley’s largest fuel cell-powered high-performance computing data center.

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Of course, there are risks associated with Bloom. It is a cyclical sector and industrial demand is currently a bit weak. Bloom spends a lot of money to scale up prior to the recovery, which is currently losing money. But with a strong balance sheet and a history of solid results, now could be the best time to invest in this risk/reward bet on clean energy for AI.

Powering AI

Matt DiLallo (Brookfield renewable): Data centers play a crucial role in supporting the growth of AI. They house the AI ​​chips that Nvidia and others are developing to power AI applications. These facilities require a lot of energy, especially to run AI applications. For example, AI search uses up to ten times more power than a normal search process.

Technology companies are proactively addressing their growing power needs by signing long-term power purchase agreements renewable energy developers like Brookfield Renewable. For example, the company recently launched a agreement with tech titan Microsoft to develop more than 10.5 gigawatts (GW) of renewable energy in the period 2026-2030. The massive deal is more than eight times larger than the largest corporate power purchase agreement ever signed. It adds to the approximately 1 GW of renewable energy Microsoft has already contracted from Brookfield.

That agreement puts Brookfield in one strong position to deliver more than 7 GW of new renewable energy capacity annually until the end of this decade. Those development projectstogether with other organic growth engines and acquisitions, should drive greater than 10% annual growth in Brookfield’s resources from operations (FFO) per share until at least 2028. That should give Brookfield Renewable the strength to grow its high-yield dividend, which has recently been around 4.5%, 5 to 9% annually over the long term.

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Brookfield’s AI-powered growth accelerator puts it in one strong position generating double-digit total annualized returns in the coming years. That high probability of high returns makes it a great way to benefit from the AI ​​boom.

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Jason Hall holds positions in Brookfield Renewable, Brookfield Renewable Partners and Nvidia. Matt DiLallo holds positions in Brookfield Renewable, Brookfield Renewable Partners, and Intel and has the following options: long January 2025 $30 calls on Intel, short January 2025 $30 puts on Intel, short June 2024 $50 calls on Intel, and short May 2024 $50 calls on Intel. Tyler Crowe holds positions in Brookfield Renewable. The Motley Fool holds positions in and recommends Brookfield Renewable, Microsoft, and Nvidia. The Motley Fool recommends Brookfield Renewable Partners and Intel and recommends the following options: long January 2025 $45 calls to Intel, long January 2026 $395 calls to Microsoft, short January 2026 $405 calls to Microsoft, and short May 2024 $47 calls to Intel. The Motley Fool has a disclosure policy.

Beyond Nvidia: 3 Under-the-Radar Stocks to Profit from the AI ​​Boom was originally published by The Motley Fool

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