The AI trade is up and running again, with the latest bout of interest spurred by Micron’s upbeat sales and profit estimates stealing the spotlight from Nvidia. Micron plays a vital role in the AI industry because it provides the high-bandwidth memory that helps train AI systems.
This year's AI trade has had all the elements of a gold rush. A FactSet search for earnings calls that mentioned “AI” found that 199 of the 500 companies in the S&P500 mentioned it in their most recent results. Of these, 12 companies, including Meta, Nvidia and Microsoft, mentioned it at least 50 times. Technology companies are leading the pack, with 91% mentioning AI.
As with any gold rush, confidence about whether the immense amounts invested are justified has waxed and waned. However, there have been other, less obvious, beneficiaries of AI, which are evident in the logistics, healthcare, and cybersecurity industries. These companies, which have been using more basic versions of AI for years, have chosen to sell the metaphorical shovels needed to build the AI industry.
Amid the world’s transition to renewables, data centres used to train AI models are turning small towns, where they are often located, into power-hungry beasts. An example of companies that stand to benefit indirectly from the AI craze are the ones providing power to these centres, the data centre owners themselves, and the providers of data storage solutions.
It is estimated that humans have created 9x more data in the last two years than in the entire history before that. It is estimated that 30 trillion gigabytes of data will be created between 2024 and 2025. Only 2 trillion gigabytes of storage capacity will be manufactured during that time. According to Goldman Sachs, the demand for data centre power will grow by 160% by 2030. Data centres consume 1-2% of global power, but this percentage will likely double to 3-4% by the end of the decade.
Power generation
Dominion Energy is one example of a company well-placed to benefit from AI and the effect of increased computing demand on power grids in general. Dominion utilises a wide range of energy sources to produce power, with renewables making up a bigger portion than coal and others.
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