A Reliable Powerhouse?
The growing electricity demand from data centers running AI workloads underscores the need for reliable power. Could this be a potential opportunity for long-term investors?
The rising electricity demand from data centers powering AI programs (see
Power Play) carries unique requirements, with reliability being paramount. In our view, this electricity demand may bring new investment opportunities for long-term investors.
- While renewables like wind and solar are often seen as the answer to reducing carbon emissions, they present challenges in terms of reliability. Nuclear power, however, is gaining interest as a proven, reliable, and clean energy source that can meet rising global electricity demand (see A Nuclear Energy Renaissance?).
- Enterprises running AI programs require data centers to have constant, uninterrupted electricity. Nuclear power is the most reliable source of electricity in the U.S., generating an average of 93% of its maximum capacity, as shown in the chart above. In contrast, other energy sources face limitations: renewables depend on variable weather conditions, while coal and natural gas plants experience downtime for routine maintenance and refueling.1
- Additionally, nuclear power can help prevent regional blackouts, particularly during peak summer and winter demand and in adverse weather conditions, as the grid increasingly relies on variable power sources. We believe the growing acceptance of nuclear energy could create tailwinds for companies involved in uranium mining and production, as well as those generating electricity through nuclear power.
1 U.S. Department of Energy
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Companies involved in, or exposed to, AI-related businesses may have limited product lines, markets, financial resources or personnel as they face intense competition and potentially rapid product obsolescence, and many depend significantly on retaining and growing their consumer base. These companies may be substantially exposed to the market and business risks of other industries or sectors, and may be adversely affected by negative developments impacting those companies, industries or sectors, as well as by loss or impairment of intellectual property rights or misappropriation of their technology. Companies that utilize AI could face reputational harm, competitive harm, and legal liability, and/or an adverse effect on business operations as content, analyses, or recommendations that AI applications produce may be deficient, inaccurate, biased, misleading or incomplete, may lead to errors, and may be used in negligent or criminal ways. AI technology could face increasing regulatory scrutiny in the future, which may limit the development of this technology and impede the future growth. AI companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology.
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