Generative artificial intelligence (AI) platforms such as ChatGPT have gained massive traction over the past 18 months and continue to evolve. Several companies are expanding data centre capacity and gaining a foothold in the highly disruptive vertical to keep pace with the AI megatrend. In fact, according to Nvidia chief executive officer (CEO) Jansen Huang, companies might deploy close to US$1 trillion in the next four years to expand their data centre capabilities.
AI-based data centres are energy intensive, requiring 90 megawatts of electricity, three times the power required compared to the current generation of data centres. This rising power demand will create massive opportunities for power producers globally. An IEA report forecasts electricity consumed by data centres and cryptocurrency mining companies could more than double from 460 terawatt-hours in 2022 to 1,050 terawatt-hours in 2026, making power producers such as Brookfield Renewable Partners (TSX: BEP.UN), NextEra (NYSE: NEE), and Enbridge (TSX: ENB) top investment options right now.
Brookfield Renewable Partners stock
Brookfield Renewable is among the largest clean energy companies globally, operating a portfolio of cash-generating assets. Due to inflation-linked long-term power-purchase agreements (PPAs), it generates stable cash flows across market cycles, offering shareholders a tasty yield of over 5%.
Earlier this year, Brookfield partnered with Microsoft to deliver 10.5 gigawatts of new renewable power, eight times larger than the largest single corporate PPA ever signed. The multi-year agreement will provide Microsoft access to a pipeline of clean energy capacity to support the growing demand for cloud services.
Down over 45% from all-time highs, Brookfield Renewable stock trades at a 30% discount to consensus price targets.
NextEra Energy stock
Valued at US$116 billion by market cap, NextEra Energy is the largest electric utility in the U.S., serving over 12 million people. After adjusting for dividends, the clean energy giant has returned more than 300% to shareholders in the past decade. Today, it pays shareholders an annual dividend of $2.06 per share, indicating a forward yield of 2.6%.
NextEra has raised its dividends every year for 30 consecutive years. Analysts expect its adjusted earnings to grow by 8% annually in the next five years, which should drive dividend payments higher.
Given the consensus price target estimate, NEE stock currently trades at a discount of less than 2%.
Enbridge stock
Enbridge is an oil and gas giant that owns and operates a portfolio of midstream assets, including pipelines and storage facilities in North America. Unlike oil producers, Enbridge is fairly immune to fluctuations in oil prices as its revenue is tied to the volume of natural gas or other commodities that flow through its pipes.
Enbridge is the largest natural gas utility in North America and is expanding its renewable energy business. A stable revenue stream has allowed Enbridge to increase dividends every year since 1995. Its dividend yield is close to 7%, while the energy giant has a sustainable payout ratio of less than 70%.
ENB stock trades at less than 12 times distributable cash flow per share, which is forecast to grow by 5% annually over the next five years.
