AI Boom: Non-Tech Companies Poised to Profit from Data Center and Renewable Energy Surge
In the realm of artificial intelligence (AI), a remarkable transformation is unfolding, presenting an extraordinary investment opportunity for a select group of non-tech companies. This technological revolution is fueling an unprecedented demand for data centers and renewable energy, creating a lucrative landscape for forward-thinking investors. Scotiabank’s investment banking division has meticulously analyzed this emerging trend, identifying six stocks that are strategically positioned to capitalize on this surge.
The AI-Driven Data Center and Energy Surge
The meteoric rise of AI applications has ignited an insatiable appetite for computational resources and electricity, propelling a dramatic increase in demand for data centers and renewable energy sources. At the heart of this phenomenon lies the specialized chips known as GPUs (Graphics Processing Units), which are essential for powering AI systems. Despite their superior efficiency compared to traditional CPUs (Central Processing Units), GPUs consume significantly more electricity, leading to a substantial increase in energy consumption.
Identifying Investment Opportunities
Scotiabank’s astute analysts have handpicked six stocks that are exceptionally well-positioned to harness the burgeoning demand for data centers and renewable energy stemming from AI applications. These companies are poised to witness a significant surge in demand for their services, translating into potential valuation growth.
Data Center Operators: Equinix and Digital Realty
Equinix and Digital Realty stand out as prominent players in the data center industry, ideally situated to benefit from the AI-driven surge in demand. Digital Realty has projected a remarkable 28% increase in data creation and consumption by companies globally by 2025 compared to 2020 levels, underscoring the exponential growth in AI usage across businesses. To cater to this escalating demand, Equinix recently introduced a cloud service that empowers companies to manage their Nvidia AI supercomputing infrastructure for building AI applications.
Renewable Energy Providers: NextEra Energy, NextEra Energy Partners, and Brookfield Renewable Partners
The massive data centers operated by Big Tech companies, such as Amazon, Google, and Microsoft, are insatiable consumers of electricity, making them the largest corporate buyers of renewable power. Scotiabank’s analysts have identified NextEra Energy, NextEra Energy Partners, and Brookfield Renewable Partners as the frontrunners in meeting the soaring electricity demand of Big Tech companies with renewable energy sources. These companies are well-positioned to capitalize on the growing need for sustainable energy solutions.
Investment Recommendations
Digital Realty: A Prime Candidate for Shareholder Value Creation
Scotiabank has upgraded Digital Realty to a “Sector Outperform” rating, recognizing its exceptional potential for shareholder value creation. With a price target of $155, the company’s shares have the potential to appreciate by approximately 9% from their current price. Digital Realty’s ability to expand capacity to meet the seemingly insatiable demand for data from AI applications, coupled with its strategic partnerships for funding new investments, positions it as a compelling investment opportunity.
Conclusion
The convergence of artificial intelligence and the digital landscape has created a unique investment opportunity for non-tech companies. Data center operators like Equinix and Digital Realty, along with renewable energy providers such as NextEra Energy, NextEra Energy Partners, and Brookfield Renewable Partners, are poised to reap substantial rewards from the AI boom. Investors seeking exposure to this transformative trend should consider these companies as potential additions to their portfolios.