Energy Stocks Poised for Growth Amid Increasing AI Demand

Wall Street is buzzing about energy-related stocks, especially with the rising demand from AI data centers. According to Goldman Sachs, U.S. electricity demand is expected to rise from stagnant levels over the past decade to a 2.4% annual growth rate through 2030, largely driven by AI data centers.

This significant increase in power needs has investors debating whether nuclear energy or natural gas will serve as the primary fuel source while renewable energy ramps up.

Regardless of which energy source prevails, Chart Industries is well-positioned for the future.

Chart Industries: A Leader in Energy Equipment

Chart Industries (NYSE: GTLS) produces various equipment that cools, heats, or purifies numerous types of molecules. Their product lineup includes cryogenic tanks, heat exchangers, industrial fans, circulators, turbines, and more.

Having established itself as a leader in traditional energy and liquefied natural gas (LNG), Chart expanded its operations significantly with the 2022 acquisition of Howden.

This acquisition has allowed Chart to extend its reach into many energy sectors, including liquefied natural gas, the growing hydrogen market, and even nuclear energy. Additionally, the Howden acquisition has provided exposure to clean mining processes, involving lithium and copper, essential for solar energy and electrification efforts.

Chart’s Recent Earnings Highlight Growth Potential

Recently, Chart Industries reported third-quarter earnings that fell short of expectations, mainly due to the timing of high-margin projects. However, their incoming orders increased, and profit margins improved. Despite the earnings miss, the stock still saw a notable rise.

Investors received the company’s early 2025 guidance positively, anticipating revenue growth of approximately 12% and earnings-per-share growth of an impressive 39% compared to the 2024 forecast. Such positive projections suggest that delayed 2024 orders may come to fruition next year.

Chart Industries Gains Ground in the Nuclear Sector

During the earnings call, management revealed several new orders from nuclear customers, including EDF of France. CEO Jill Evanko noted that they have begun working with a “new leader in the space,” supplying industrial fans while also collaborating with small modular reactor (SMR) companies for gas circulators, fans, turbines, and air coolers.

This year has seen a surge in interest in nuclear investments, with companies like Vistra Corp rising to the top of the S&P 500. In a significant move, Microsoft secured a 20-year deal to reactivate the Three Mile Island nuclear facility operated by Constellation Energy.

However, there was a setback when regulators rejected a deal between Amazon and Talen Energy regarding nuclear power, stating it posed too much risk for Pennsylvania’s electricity grid. This incident suggests the path forward for nuclear energy might not be as straightforward as many had anticipated.

Image source: Getty Images.

If AI data center operators turn away from nuclear power due to reliability or environmental concerns, they may increase their reliance on natural gas, which would still benefit Chart Industries as LNG remains a core component of their business.

Although Chart is not a producer, they hold a strong position in LNG import and export terminals. In its recent earnings report, the company announced significant orders for their new IPSMR LNG technology, which was chosen by ExxonMobil, Woodside Energy, and Viability Gap in Tanzania for large LNG projects.

In addition, hydrogen is emerging as a valuable energy source since it produces no carbon when burned. Following the introduction of seven hydrogen hubs across the U.S. under the Bipartisan Infrastructure Act of 2021, Chart has swiftly secured hydrogen contracts, with notable orders coming from Egypt and Europe last quarter.

Chart Industries Expands Presence in Data Centers

Chart is not only supplying energy fuels but also has recently won orders for equipment required within data centers. As AI servers continue to generate increasing amounts of heat, effective cooling solutions are pivotal. Evanko mentioned that Chart received its second data center order in the third quarter, followed by a third order for air-cooled heat exchangers in the fourth quarter.

Chart Presents Value Amid AI Expansion

Currently, Chart Industries trades at around ten times its recent 2025 projections. Although the company accrued significant debt to acquire Howden, it has made progress in reducing that debt. Free cash flow surged to $175 million last quarter, aiming for $400 million this year, with 2025 expectations climbing to between $550 million and $600 million. This financial boost could significantly decrease Chart’s $3.9 billion in debt.

With numerous growth opportunities tied to data centers and energy production, investors should consider Chart Industries. The company will hold a capital markets day for investors on November 12, offering insights into its future strategies.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is on The Motley Fool’s board of directors. Billy Duberstein and/or his clients have positions in Amazon, Chart Industries, and Microsoft. The Motley Fool has positions in and recommends Amazon, Chart Industries, Constellation Energy, Goldman Sachs Group, and Microsoft. The Motley Fool also recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.