The artificial intelligence (AI) revolution is the hottest thing in markets these days. Driving huge profits for chip companies and sparking a massive wave of investment in generative AI startups, it is driving considerable economic growth.
With all that being said, investing directly in AI stocks may not be the right play right now. The companies directly involved in AI, such as computer chip makers and software developers, have gotten incredibly expensive. Palantir, for example, trades at an unbelievable 64 times sales. I’m not saying it’s impossible for a stock to be worth that much, but it will take a lot of growing.
In the meantime, energy companies and data centre companies play a vital role in the AI revolution, which is still underappreciated by the markets. In this article, I will explore how Canadian investors can profit from AI’s growing energy needs.
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Renewable energy companies
AI is nothing if not energy-intensive. According to estimates put forward by Economist Alex De Vries, AI will consume between 85 and 134 terawatt hours of power in 2027. That’s about as much as The Netherlands consumes today. All of that energy has to be generated somewhere, and forward-looking technology companies are likely to look to renewable energy to fuel their AI data centres.
Indeed, we’re already seeing evidence of this happening. Major technology companies are looking to renewable energy for data centres, and Canadian energy companies are already striking deals with them. Consider Brookfield Renewable Partners (TSX: BEP.UN), for example. Brookfield Renewable Partners is a company that provides considerable amounts of energy to tech companies. A great example of this is Brookfield’s recently inked deal that will have it supply 10.5 Gigawatts of clean power to Microsoft. The deal will see Brookfield supply potentially billions of dollars’ worth of power to the AI giant over a period of four years. The deal even includes options to extend the timeline further.
AI data centre companies
Another category of company that could potentially profit from AI developers’ need for energy is AI data centre companies. These are the firms that physically house the servers on which AI applications run. There are many data centres in the world, but not all of them have the massive hallways full of NVIDIA-powered systems that modern AI workloads require.
Another Brookfield company is a great example here: Brookfield Infrastructure Partners (TSX: BIP.UN). Brookfield Infrastructure Partners has been investing in data centres for years. Some of its properties include the following:
- Brazil’s Ascenty data centre
- The TDF group of cellular towers
- Texas’s Cyxtera data centres
- And more
Brookfield has put out many press releases indicating its eagerness to pursue the AI data centre opportunity further. It’s a good time for the company to do so, as it raised billions of dollars in the last 12 months. So, deals may get done.
Foolish takeaway
It’s an exciting time for the AI industry – -not just tech companies but those who gain exposure indirectly as well. Everybody knows about the chip and software giants developing snazzy generative AI applications, but not everybody knows about the energy companies and data centres powering the technology. The latter, therefore, could be “hidden gem” opportunities today.
