In an more and more diversified investment surroundings, buyers are turning their consideration past know-how corporations to sectors akin to actual property, power and utilities. This renewed curiosity is because of the enhance in power demand wanted for data centers, that are experiencing an unprecedented growth because of the assist required by new synthetic intelligence (AI) applied sciences.
Increased Energy Demand: A Boost for Suppliers
According to analysts, the power consumption of data centers below development in the United States is anticipated to characterize greater than 50% of the present consumption of current data centers. Analyst Thomas Thornton notes that “data center energy consumption is expected to double again in the coming years, even after these new centers are operational.” This pattern is driving demand not solely from power producers and community tools producers, but additionally from corporations concerned in uncooked supplies akin to uranium and copper, important for data middle electrical wiring and networks.
The Role of AI in Energy Consumption
The enhance in the usage of graphics processing items (GPUs), that are extra energy intensive, performs an important position in this development. “Power usage for AI workloads is expected to grow at a CAGR of 25% to 33% between 2023 and 2028,” Thornton notes. This pattern favors extra fashionable data centers, designed particularly to assist the calls for of AI.
Companies Benefiting from Growing Energy Demand
Bank of America has recognized a number of corporations that would profit considerably from this rising power demand, together with Caterpillar and Equinix. In a latest observe, the agency highlighted Caterpillar as an “underrated” play as a consequence of its intensive expertise in backup energy technology. Despite the slowdown in different finish markets, data centers proceed to be a robust level in Caterpillar’s outcomes, the place its energy technology unit has outperformed the corporate’s total development over the previous 4 quarters.
Growth Prospects for Data Center Companies
REITs like Digital Realty Trust and Equinix are additionally starting to seize the rising demand for AI. Although each anticipate sturdy income development this yr, they diverge in phrases of web outcomes. “EQIX shows strong bottom line growth, supporting our Top Pick thesis, while DLR has yet to demonstrate its growth potential,” defined analyst David Barden. Bank of America expects shares of Digital Realty and Equinix to rise roughly 24% and 33%, respectively.
Other Companies with Growth Potential
Aspen Tech and Eaton additionally obtain optimistic scores from Bank of America on the subject of data middle infrastructure and power suppliers. The agency forecasts that Eaton shares may rise one other 12.2%, justified by sturdy margin efficiency and a much less cyclical portfolio combine.
In conclusion, whereas the demand for AI provides new calls for to already conventional data centers, the growth of those infrastructures is inevitable to satisfy each present and future wants, which in flip generates important opportunities for buyers and firms inside the data middle ecosystem.
