The AI Boom: Boring Utility Stocks Set to Benefit, According to Goldman Sachs
In a surprising twist, the most unassuming area of the stock market is being touted as the next big beneficiary of the AI boom. According to Goldman Sachs, utility stocks are poised to reap the rewards of the vast build-out of AI data centers, which is driving a surge in electricity demand.
While utility stocks have traditionally been seen as a safe but unexciting investment option, the growing adoption of AI is shaking up this perception. The increasing demand for electricity from AI-focused data centers is breathing new life into the sector, making it a potentially lucrative opportunity for investors.
Goldman Sachs highlighted four buy-rated utility stocks that are expected to thrive in the AI boom. Xcel Energy, NextEra Energy, Southern Co., and Sempra are all poised to benefit from the growing demand for electricity driven by AI data centers.
The bank forecasts a 15% compound annual growth rate in data center power demand from 2023 to 2030, with data centers projected to make up 8% of total US power demand by 2030. This unprecedented growth in electricity demand is already reflected in the recent price performance of utility stocks, which are up about 11% year-to-date.
While many investors are focused on companies directly involved in AI, such as semiconductor giants like Nvidia and AMD, Goldman Sachs suggests that indirect exposure through utility companies could also be a profitable strategy. By investing in the companies that are powering the AI revolution, investors can tap into the significant growth potential of the AI-related electricity demand.
As the AI boom continues to reshape industries and drive innovation, utility stocks may prove to be a surprisingly lucrative investment opportunity. With the support of Goldman Sachs’ buy ratings, these utility stocks are well-positioned to benefit from the unprecedented growth in AI-related electricity demand.
