Generative artificial intelligence (AI) platforms, like ChatGPT, have experienced significant growth in the past 18 months and continue to develop. Many companies are increasing their data center capacity to keep up with the AI trend. According to Nvidia CEO Jansen Huang, these companies could invest close to $1 trillion in the next four years to expand their data center capabilities.
AI-based data centers require a substantial amount of energy, with a demand of 90 megawatts, three times more than traditional data centers. This growing power demand presents significant opportunities for power producers worldwide. An IEA report predicts that electricity consumption by data centers and cryptocurrency mining operations could more than double from 460 terawatt-hours in 2022 to 1,050 terawatt-hours in 2026, creating investment opportunities for companies like Brookfield Renewable Partners, NextEra, and Enbridge.
Brookfield Renewable is a leading clean energy company with a portfolio of cash-generating assets. It offers stability through inflation-linked long-term power purchase agreements, providing shareholders with a yield of over 5%. The company recently partnered with Microsoft to deliver a substantial amount of renewable power, showcasing its commitment to sustainability.
NextEra Energy, valued at $116 billion, is the largest electric utility in the U.S. with a track record of strong returns for shareholders. The company has increased dividends annually for 30 years and is expected to continue growing its earnings and dividends. With a forward yield of 2.6%, the stock is trading at a slight discount to its consensus price target.
Enbridge, an oil and gas company with a focus on midstream assets, boasts a diverse portfolio in North America. Its revenue is resilient to oil price fluctuations, as it is tied to the volume of natural gas flowing through its pipelines. Enbridge has a steady dividend yield of nearly 7% and a sustainable payout ratio. The stock trades at an attractive multiple to its forecasted cash flow growth over the next five years.
