Editor's note: Many of the new technical innovations that have gripped the world require electricity... and a lot of it. According to Pete Carmasino from our corporate affiliate Chaikin Analytics, that's great news for one "boring" sector. In this piece – which was first published in a recent issue of the Chaikin PowerFeed e-letter – Pete details why electricity demand will skyrocket in the years to come... creating huge potential for one vital industry.
The Electrification Megatrend Just Turned a Dull Sector 'Bullish' By Pete Carmasino, chief market strategist, Chaikin Analytics
We're on the verge of "Version 2.0" in electricity. And in the coming years, this mostly "boring" sector will get exciting. It all comes down to two emerging technologies in a powerful megatrend... The first is artificial intelligence ("AI"). It's reshaping our understanding of what computers can do. But notably, training and running AI machines takes a lot of electricity. Secondly, cryptocurrencies are reshaping how the world thinks about exchanging value for goods and services. Love them or hate them, you can't deny that they're making waves. And just like AI, it takes a massive amount of electricity to develop cryptocurrencies. After all, these tasks require a lot of computational power. That translates to the need for huge data centers. And of course, these data centers need a ton of electricity. Most people don't realize that these two technologies will increase our collective demand for electricity exponentially in the coming years. And it'll be hard for supply to keep up. As I'll explain, that will create major opportunity in one crucial sector...
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About a third of the world's data centers are in the U.S. today. And according to a recent study from the International Energy Agency ("IEA"), their energy usage is exploding... The IEA noted that U.S. data centers' electricity consumption rate was about 200 terawatt-hours ("TWh") in 2022. By 2026, it expects the rate in the U.S. to climb to about 260 TWh. This shift will be even more dramatic worldwide... According to the IEA, global data centers consumed about 460 TWh in 2022. In the high case, the IEA believes the number could surge to more than 1,000 TWh by 2026... To put that in perspective, 1,000 TWh is roughly equal to Japan's total electricity usage. It isn't just about the power needed to run AI applications or mine cryptos, either. The data centers also need to be cool enough for all the equipment to run properly... And cooling systems require energy. Electric cars are another burgeoning source of electricity consumption... This development may be slow-moving, but it's well underway. And even that pace will ramp up our total electricity demand in the coming years... In fact, driving an electric car the national average of just 37 miles per day would lead to 353 kilowatt-hours ("kWh") of charging per month. For comparison, the average monthly power consumption in California is 572 kWh. That means an electric car could increase the average household power consumption in California by about 62%. And that's just for one car driven an average distance each day. Think about the massive burden of households with two electric cars that get driven a lot. The potential demand from electric cars alone is huge. And my point is simple... Utility companies need to start upgrading their facilities to keep up. The demand for electricity is growing faster than the capabilities of our utility grid. And several areas of our new technology-filled world are driving this long-term change. Conservatively, the Department of Energy expects U.S. electricity demand to rise nearly 40% through 2050. But fortunately, we don't need to wait 26 years to take advantage... You see, the recent market volatility has renewed investors' interest in utilities. At Chaikin Analytics, we use a system called the Power Gauge that gathers fundamentals and technicals into a simple rating. It's a way to get a read on an investment's potential outlook. After months of lower ratings, the Utilities Select Sector SPDR Fund (XLU) just turned "bullish" in the Power Gauge. Take a look... Folks, the takeaway is simple. If you're not paying attention to the utilities space now... I recommend you start today. Good investing, Pete Carmasino
Editor's note: Marc Chaikin – the founder of Chaikin Analytics – predicted the 2020 and 2022 market crashes. Now, he's stepping forward with a new urgent warning. In a sit-down conversation, Marc details why a massive financial "reset" is poised to take place, starting on May 15. And thanks to his Power Gauge system, one little-known strategy could help you double – or even triple – your money as a result... Click here to learn more. Further Reading "The world now values semiconductors more than oil," Vic Lederman writes. And demand for these tiny chips isn't going to slow anytime soon. One helpful tool confirms that this is one red-hot corner of the market worth owning today... Learn more here. When it comes to AI, the headlines typically revolve around the big players. But many industries stand to benefit from the AI trend. And by broadening your scope, you'll find there are more overlooked opportunities with big upside potential... Read more here. |
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