Investing in AI-Driven Energy Suck?

J

joesxm3

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I saw some predictions that in a few years the big bottleneck with AI will be getting enough electricity to run the huge computing clusters. Add to that the draw to charge electric vehicles. How might one invest to benefit from this trend if it happens?

Energy ETF?

Company or companies that make electrical transformers?

Electric power supp!y companies?

Natural gas stocks, assuming local electricity production near data centers?

how does oil fit in to this?

What about nuclear? I saw something about China ramping up some sort of new and safer type of nuclear plant. I saw something else saying that USA was poised to grow power production 2x or 3x compared to 8x for China?

I suppose I should include solar or wind but my gut says these are farther out and will be more decentralized.

I already have a large position in TSLA that includes the large battery pack stuff

I apologize for my ignorance. I just started thinking about this this morning.

Thanks in advance.

Joe
 
I'm not smart enough to pick the next NVDA. Our biggest wager is on Total US Market, about 50% of all investments.

I have a few dollars in small bio-health companies. The interest began in similar fashion to your energy thoughts.

When I look around me I see a significant number of residential solar installs. The positive impact of that is in flux, due to over-capacity and the electric company not wanting more fed back to their grid.

So I feel we're at a pivot that requires more local battery storage and control, so that I can charge and power cars and home appliances with less future reliance on the power company. So there will be cheaper and larger-capacity storage, and AI control systems.

Since I'm not an EE or process person, I have no idea how to take those thoughts to the next level of analysis, and pick new tech companies that might win in a big way.
 
I also have about 3% of my portfolio in gene editing stocks and ARKG. Down quite a bit but I started small and have been averaging in. I figured they might drop and I could increase my number of shares. I view them as a very long term investment and a way to diversify a little and maybe hold a winning lottery ticket on one.

I think they were really negatively affected by high interest rates since they burn money hoping to discover something that works.
 
While data center growth is expected to increase overall power consumption, innovative cooling technologies like immersion cooling (mentioned in this article: [https://www.cnbc.com/2024/08/27/nvi...-cloud-ai-data-center-energy-consumption.html) offer promising solutions to mitigate this impact.

These solutions might not be immediate, but they represent the future direction of data center design – aiming for more processing power with less energy waste.

For investors with some extra capital, companies developing and implementing these efficiency-boosting technologies could be an interesting target.

While the exact market outcome is unclear ("Who knows?"), investing in technology solutions that increase power consumption efficiency could be a winning strategy. YMMV
 
One idea would be to narrow one’s focus to investments in Texas. They have their own grid and the reflexive NIMBY impulse seems less prominent and obstructive to construction of transmission lines and other infrastructure. Austin is a growing tech center. Suprisingly, perhaps, Texas leads in sustainable wind and solar, too.

But what do I know?
 
I paid the $9 on X so I can use Grok.

I just asked these questions and I was surprised at the level of detail in the answers. It is a lazy Sunday morning so it will be a while before I sift through this stuff.
 
From Rick Ferri's "All About Asset Allocation" : "There is a classic saying on Wall Street, 'What everybody already knows is not worth knowing.' "
 
I did buy shares of GEV on 4/1/2024 while thinking about energy innovation.
 
I invested in my own solar as I'm pretty sure rolling brown-outs/blackouts will continue and get worse here in California as the load continues to increase.
But for conventional investment, maybe consider batteries as a means of equalizing the demand for power. Batteries can store power during low demand times and provide power during high demand times. This could help with the issue of excess periodical loads that overwhelm an electrical grid.
Another technology will be 'smart' appliances. These are devices you can control via your phone apps. I have my whole house that way with Alexa, but individual appliances are now going that way. For example, a window air conditioner from Frigidaire has it's own app and I can turn that AC on/off/set temps/etc any time from anywhere.
The reason I think it's invest-worthy is that the utility companies or government could mandate that they be able to control what uses power during critical peak times, or to limit excessive users by shutting down some loads. I know our local utility company has a means of doing just that for those who are chronically late on bills. Laws were made that prevented the electric company from shutting off power because of risk to people when they lack AC or heat during extreme weather. If they could shed loads other than your fridge and AC, yet still even control the thermostat, they could meet the law and still prevent non-payment of bills from becoming chronic.
With smart appliances, they could shut off your TV, washer/dryer, even your iron or toaster. Or you could yourself. Ever rush out the door and wonder; did I shut off the iron or my hot rollers? Did I close the garage door? Did I leave the stove on? All those things now, today, have versions with apps you can control remotely, and if you can, I can assure you, someone else can. Maybe that'll be the new idenity theft for the future.
 
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We got a handful of shares of CEG in the spinoff of EXC. Who knew it was an Ai play on green energy (nuclear)? We recently sold a small chunk with a 400+% gain. Still have a small amount though. It has pulled back a bit from there but has been ramping up profits & share buybacks so there's that.
 
The required dramatic growth of power generation is a real theme. But utility stocks have already moved on that, so be careful about valuation. But should be a tailwind going forward.

The logical solution is nuclear so I own a uranium stock. Not sure how long non-exonomic solutions will be pushed before logic prevails, if ever.

So we are patient.
 
Montecfo said:
The required dramatic growth of power generation is a real theme. But utility stocks have already moved on that, so be careful about valuation. ...
Click to expand...
Here is investing patriarch Ben Graham (in "The Intelligent Investor") on the problem: " ... we hope to implant in the reader a tendency to measure or quantify. For 99 issues out of 100 we could say that at some price they are cheap enough to buy and at some other price they would be so dear that they should be sold. The habit of relating what is paid to what is being offered is an invaluable trait in investment. In an article in a women’s magazine many years ago we advised the readers to buy their stocks as they bought their groceries, not as they bought their perfume. The really dreadful losses of the past few years (and on many similar occasions before) were realized in those common-stock issues where the buyer forgot to ask 'How much?' "
 
Just a thought here, but how do we know the future, power hungry server farms will be built in the U.S.?
 
joesxm3 said:
I saw some predictions that in a few years the big bottleneck with AI will be getting enough electricity to run the huge computing clusters. Add to that the draw to charge electric vehicles. How might one invest to benefit from this trend if it happens?

Energy ETF?

Company or companies that make electrical transformers?

Electric power supp!y companies?

Natural gas stocks, assuming local electricity production near data centers?

how does oil fit in to this?

What about nuclear? I saw something about China ramping up some sort of new and safer type of nuclear plant. I saw something else saying that USA was poised to grow power production 2x or 3x compared to 8x for China?
Click to expand...

This idea that there is not enough electricity available to charge EV's is a myth. The electrical needs of AI and bitcoin mining is more of a concern. There are reports of AI server farms buying out bitcoin miners to be able to get access to their electricity.

This makes me believe that investing in energy producers would be prudent. You mentioned investing in companies that make electrical transformers. Right idea, wrong product. There is nothing innovative or (likely) patentable in transformers. But there are companies like ANET, SMCI, DELL, AMZN, that make the server infrastructure that AI needs. Also Nvidia is being challenged in the chip making area by AMD, MU, INTC. This would be the "picks and shovels" companies of AI

Interestingly there is a fresh call for small nuclear reactor technology to meet future electrical needs. Both the Trump administration and the Biden administration have supported this technology. It's hardly a developed industry but there is plenty of research occurring in this area. The companies involved exclusively in nuclear are small and definitely are not yet profitable.

Months ago, I bought a small position in Vistra Corporation, a leader in electrical generation using solar, wind, and nuclear energy. It's doing quite well for me.
 
OldShooter said:
Here is investing patriarch Ben Graham (in "The Intelligent Investor") on the problem: " ... we hope to implant in the reader a tendency to measure or quantify. For 99 issues out of 100 we could say that at some price they are cheap enough to buy and at some other price they would be so dear that they should be sold. The habit of relating what is paid to what is being offered is an invaluable trait in investment. In an article in a women’s magazine many years ago we advised the readers to buy their stocks as they bought their groceries, not as they bought their perfume. The really dreadful losses of the past few years (and on many similar occasions before) were realized in those common-stock issues where the buyer forgot to ask 'How much?' "
Click to expand...

Read this a couple of times looking for anything related to the OP, things like AI, bitcoin, electrical generation, energy ETF's, EVs, etc. Nothing to see here. Are you sure you are in the correct thread?
 
Here are four companies that supply components and services to the energy sector regardless of the fuel type. {EMR} Emerson Electric, {POWL} Powell Industries, {ETN} Eaton Industries, {GEV} GE Vernova. These are blue chip stocks with solid balance sheets.
 
Qs Laptop said:
Read this a couple of times looking for anything related to the OP, things like AI, bitcoin, electrical generation, energy ETF's, EVs, etc. Nothing to see here. Are you sure you are in the correct thread?
Click to expand...
Related to @Montecfo's post immediately above mine, suggesting that all those things are already priced into the stocks. A good company is often not a good investment because its price is already too high. That is what Graham is pointing out.

Being late to the party is a very common investing mistake, and not just for retail investors. But sometimes it can work. See also Greater fool theory - Wikipedia

​

 
Qs Laptop said:
This idea that there is not enough electricity available to charge EV's is a myth. The electrical needs of AI and bitcoin mining is more of a concern. There are reports of AI server farms buying out bitcoin miners to be able to get access to their electricity.
Click to expand...
I suppose if you make certain assumptions about the market penetration of EVs right now - and the possible slow-down in that penetration going forward, EVs may not be THE problem in electrical generation. But EVs must surely add to the problem of not enough electricity in our future.

Also, I was reading an article in a couple of years old Motor Trend about the new technology in electric motors. (Biggest take away I "took away" was that motors can be made without much of the cost, weight and bulk of all that copper.) There must be a place for companies that are innovating in what is thought of as a mature industry like electric motors.

IIRC the article mentioned that something like 40% of our electricity is consumed in electric motors. Imagine that you could save 10% of that much electricity with new approaches to electric motors. How many solar panels, windmills and nuke generators would you NOT need to build with that kind of savings? Just a thought when considering individual companies.
 
joesxm3 said:
I paid the $9 on X so I can use Grok.

I just asked these questions and I was surprised at the level of detail in the answers. It is a lazy Sunday morning so it will be a while before I sift through this stuff.
Click to expand...
That's a new one for me. I've used the MS and GOOG versions, and there are interesting ideas offered. But the info can be misleading.

I was thinking yesterday about ETF's, and how wonderful it would be to find one that makes very smart decisions using its own AI.

But I haven't seen an ETF that really outshines an all-market passive approach. You mentioned that in your OP, so I thought I'd comment on it.
 
skipro33 said:
I invested in my own solar as I'm pretty sure rolling brown-outs/blackouts will continue and get worse here in California as the load continues to increase.
But for conventional investment, maybe consider batteries as a means of equalizing the demand for power. Batteries can store power during low demand times and provide power during high demand times. This could help with the issue of excess periodical loads that overwhelm an electrical grid.
Another technology will be 'smart' appliances. These are devices you can control via your phone apps. I have my whole house that way with Alexa, but individual appliances are now going that way. For example, a window air conditioner from Frigidaire has it's own app and I can turn that AC on/off/set temps/etc any time from anywhere.
The reason I think it's invest-worthy is that the utility companies or government could mandate that they be able to control what uses power during critical peak times, or to limit excessive users by shutting down some loads. I know our local utility company has a means of doing just that for those who are chronically late on bills. Laws were made that prevented the electric company from shutting off power because of risk to people when they lack AC or heat during extreme weather. If they could shed loads other than your fridge and AC, yet still even control the thermostat, they could meet the law and still prevent non-payment of bills from becoming chronic.
With smart appliances, they could shut off your TV, washer/dryer, even your iron or toaster. Or you could yourself. Ever rush out the door and wonder; did I shut off the iron or my hot rollers? Did I close the garage door? Did I leave the stove on? All those things now, today, have versions with apps you can control remotely, and if you can, I can assure you, someone else can. Maybe that'll be the new idenity theft for the future.
Click to expand...
That's all way too Big Brother for me; hard pass. But really I'd pass regardless. I've been manually controlling my appliances for many years without a single issue.

Back to the topic, I'm toying with AI-related stocks but question if I'll do much if anything. My portfolio was built on boring but steady gains over the years; it's probably not a good idea to get cute with stock predictions now.
 
^^^^. AI is a fundamentally transformative technology in its baby-steps, learning-to-talk childhood. Every public company is incorporating it one way or another. IMHO, it is impossible to pick future AI winners, so stock index funds remain the best way to capture gains, wherever they sprout and mushroom. Index fund leadership will see unpredictable turnover similar to Exxon 20 years ago to Apple today.

The picks and shovels approach to the AI gold rush includes energy companies but I am not personally curious to compete against the professionals (and their AIs) to find and place bets on the best ones.

But good luck!
 
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