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Exploring Alternative Investments in the AI Sector
In the realm of artificial intelligence stocks, significant attention has centered on Nvidia (NASDAQ: NVDA). Its stock price has soared, but recent fluctuations have made it somewhat volatile. There’s nothing fundamentally wrong with Nvidia; it designs cutting-edge chips essential for AI technologies. However, valuations can be a concern for some investors, leading to a preference for stocks with lower volatility.
For those who prefer a more conservative approach, there are alternative investments available. You can consider picks-and-shovels strategies that benefit alongside AI advancements. Here are three stocks to consider that are tied to the growth of AI.
Challenges Facing AI Technology
While artificial intelligence shows great promise, it remains imperfect. It can generate information disconnected from reality and struggles with visual representations, like rendering hands in images. Additionally, there are limited regulations regarding its deployment. Yet, these issues pale compared to the significant challenge AI faces: energy consumption.
Image source: Getty Images.
The primary concern is that AI computations require vast amounts of power, and this demand is set to grow dramatically. Electricity usage in data centers, the backbone of AI, is predicted to increase by 300% over the next decade, presenting a significant opportunity for companies providing energy. Bloom Energy (NYSE: BE), Dominion Energy (NYSE: D), and Brookfield Renewable (NYSE: BEP)(NYSE: BEPC) are particularly well-positioned to capitalize on this demand. Let’s explore these three alternative investments more closely.
1. Bloom Energy: Fast Power Solutions
A significant challenge for AI and data centers is the slow pace at which utilities connect to the electricity grid. Constructing new infrastructure, like power lines and plants, takes time. Bloom Energy offers a solution to this issue.
Bloom Energy produces a “solid oxide platform for distributed electricity generation.” It manufactures hydrogen fuel cells that can be deployed quickly wherever needed. Notably, the company reported a $2.5 billion product backlog and a $9 billion service backlog at the end of 2024, indicating strong demand that is likely to increase as AI companies seek rapid energy solutions.
2. Dominion Energy: Positioned for Growth
Dominion Energy, known for being a traditional regulated utility, currently provides a robust dividend yield of 5%. Its regulatory status ensures it receives government approval for rates and investments, granting it a monopoly in its service regions, which leads to interesting implications for AI.
Dominion serves crucial areas of Virginia, a major hub for data centers. Recently, requests for data center electricity hookups surged by 88%. This rising demand should translate into rate hikes and capital investments, driving expected earnings growth of 5% to 7% annually in the coming years.
3. Brookfield Renewable: A Sustainable Option
As power needs grow for AI, there’s a shift toward cleaner energy sources. Brookfield Renewable focuses on this demand with a diverse portfolio that includes hydroelectric, solar, wind, and battery power. The company is also moving into nuclear energy investments, making it an attractive option for AI firms seeking sustainable power solutions.
Importantly, Brookfield has a long-term, 10.5-gigawatt deal with Microsoft to support AI data center expansion, and it is negotiating similar arrangements with other companies. This positions Brookfield for growth in both clean energy and AI, along with a yield of up to 6.6%.
Investing in AI Beyond Traditional Stocks
Bloom Energy, Dominion, and Brookfield Renewable represent alternative ways to invest in artificial intelligence without directly purchasing AI stocks. While these are not the only options, they can be appealing for investors wary of volatility and high valuations typically associated with AI investments.
Is It Time to Invest in Bloom Energy?
Before making an investment in Bloom Energy, consider the following:
The Motley Fool analyst team recently identified what they consider the 10 best stocks for immediate investment, and Bloom Energy did not make the list. The selected stocks are projected to have significant growth potential in the coming years.
For context, when Netflix was recommended on December 17, 2004, a $1,000 investment at that time would be worth $594,046 today! Similarly, a $1,000 investment in Nvidia on April 15, 2005, would have grown to $680,390!
It’s also notable that Stock Advisor has an average return of 872%, well outperforming the S&P 500’s 160% return. Stay informed on their latest recommendations by joining Stock Advisor.
*Stock Advisor returns as of April 21, 2025
Reuben Gregg Brewer holds positions in Brookfield Renewable Partners and Dominion Energy. The Motley Fool recommends Microsoft and Nvidia, as well as Brookfield Renewable, Brookfield Renewable Partners, and Dominion Energy. The Motley Fool discloses its investment positions.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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