Investors focusing on the artificial intelligence (AI) industry have primarily looked at companies producing chips, computer servers, and cloud services. However, the impact of AI extends beyond the tech sector and is expected to boost earnings in various other industries in the near future.
Enbridge, a company known for its oil transmission infrastructure, has made strategic investments in natural gas and renewable energy sectors. These areas are poised to benefit from the expansion of AI data centers due to the high energy consumption of computers running AI programs. Existing electricity generation and transmission networks may struggle to meet the increased demand, leading data center firms to explore on-site power generation options. Renewable energy sources and natural gas are being considered to address this challenge.
Enbridge is well-positioned to capitalize on this opportunity. The company acquired Tri Global Energy, the third-largest American wind and solar developer, in 2022. It also operates a vast natural gas transmission network in the U.S. and recently acquired three natural gas utilities, positioning itself as the largest operator in North America. Enbridge is involved in LNG export projects and is expanding its natural gas infrastructure to support these initiatives, anticipating a rise in demand for natural gas from domestic and international markets.
Currently trading around $53, Enbridge has seen a 10% increase in stock price over the past month, reaching a new 12-month high. The company’s growth prospects are bolstered by recent interest rate cuts in Canada and anticipated cuts in the U.S., which will lower borrowing costs and support Enbridge’s growth initiatives. The company raised its 2024 guidance and expects ongoing cash flow growth of 3-5%, driven by its capital program and new acquisitions.
With a history of dividend increases over the past 29 years, Enbridge offers investors a 6.9% dividend yield at the current price. While not a traditional tech supplier, Enbridge stands out as a potential beneficiary of the AI boom. The market may not fully reflect the potential AI upside, making Enbridge an attractive option for a buy-and-hold portfolio, despite potential short-term market fluctuations.
