AI Investment Surge: Key Players and Market Dynamics
Microsoft and the Future of AI
In March 2023, Microsoft (MSFT) founder Bill Gates noted two transformative technologies in his lifetime. He echoed his fascination with the graphical user interface of 1980, a foundation for modern operating systems like Windows. The second technology he discussed was OpenAI’s large language model (LLM), ChatGPT. Gates challenged his contacts to train the model for an AP Biology exam, expecting it to struggle with the deep analytical demands. Surprisingly, ChatGPT not only passed but correctly answered 59 of the 60 questions.
As large language models like ChatGPT continue to evolve, many leading technologists believe artificial intelligence is the next frontier for innovation and growth. This belief drives tech giants, referred to as the “Magnificent 7,” such as Meta Platforms (META) and Microsoft, to invest billions in Nvidia (NVDA) chips and data center technologies in pursuit of AI supremacy.
According to IDC Research, worldwide AI spending is projected to double by 2028, reaching approximately $632 billion, which translates to a compound annual growth rate (CAGR) of about 29%.
Projected Energy Consumption of Data Centers
Currently, the “Magnificent 7” dominate AI due to the high initial startup costs for GPUs and data centers. However, the costs do not end with construction; data centers necessitate substantial electricity. A December 2024 report from the US Department of Energy (DOE) anticipates that energy consumption by data centers will “double or triple by 2028,” following a previous doubling over the past decade. As the electrical grid faces mounting pressures, major tech firms will need to secure their own energy resources. Here are two reasons the energy sector is well-positioned for growth over the next four years:
· Supply & Demand: The US electric grid is nearing its capacity. During a recent heat wave, The Electricity Reliability Council of Texas (EROC) had to pay Bitcoin miner Riot Platforms (RIOT) over $30 million to curb electricity consumption. Meanwhile, demand from data centers is surging.
· Regulatory-Friendly Environment: Recently, former President Donald Trump declared a “National Energy Emergency” through an executive order, which addresses the nation’s “inadequate energy supply and infrastructure.” This initiative aims to relax stringent regulations imposed on energy producers.
Bloom Energy: Meeting Current Energy Needs
Overview of Bloom Energy
With a Zacks Rank #2 (Buy), Bloom Energy (BE) utilizes natural gas and various fuels to produce electricity through chemical reactions. This technology aids data center operators and other businesses in generating their own clean energy, minimizing reliance on conventional electrical grids. As natural gas prices and the United States Natural Gas ETF (UNG) rise, BE is strategically positioned to capitalize on the current market opportunities.
Major Deal Boosts Bloom Energy
On November 15th, shares of BE soared by around 59% following the announcement of a significant agreement to supply up to 1 gigawatt of fuel cells to American Electric Power (AEP). AEP plans to integrate these fuel cells into AI data centers, which could lead to additional orders in 2025. This deal has set the stage for BE’s shares to form an unusually robust high-tight flag pattern. Concurrently, AI leader Microsoft has indicated that it is considering using natural gas to fuel its AI data centers to meet rising demand.
Bloom Energy’s Resilience in a Weak Market
Analyzing a company’s performance relative to its peers provides clear insights into industry leaders. While competitors in the AI energy sector, such as Constellation Energy (CEG) and Oklo (OKLO) have understandably struggled due to market downturns, BE has demonstrated remarkable stability, maintaining a sideways trend amidst fluctuating market conditions.
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Wall Street Analysts Predict Strong Growth for Bloom Energy
Analysts’ Earnings Forecasts
According to Zacks Consensus Estimates, Wall Street analysts hold an optimistic outlook for Bloom Energy. Predictions indicate that the company’s earnings per share (EPS) are expected to increase by 35.71% in 2025 and an impressive 89.21% in 2026.
Image Source: Zacks Investment Research
Strategic Positioning in the Energy Market
The intersection of rapid AI investment and evolving regulatory frameworks offers a significant opportunity for Bloom Energy. The company is well-positioned to meet the increasing demand for decentralized and reliable power, and it is likely to gain from the rising energy needs associated with the AI sector.
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Further insights include analysis reports on notable companies like Microsoft Corporation (MSFT), Constellation Energy Corporation (CEG), and NVIDIA Corporation (NVDA).
This article first appeared on Zacks Investment Research (zacks.com).
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
