When it comes to artificial intelligence stocks, early investment attention has focused on Nvidia (NVDA -1.17%), a semiconductor chip designer. Its stock price has surged, but lately, it has become volatile. While there’s nothing inherently wrong with Nvidia, some investors might be deterred by its valuation or volatility.
For more conservative investors, there are alternative ways to invest in AI. You can consider ‘picks-and-shovels’ plays that will benefit alongside AI companies as the technology grows. Here are three stocks that might not be obvious AI plays.
The Energy Problem Facing AI
Artificial intelligence is impressive but still imperfect. It can generate answers without basis in reality and struggle to render certain details, like hands in pictures. However, the bigger problem AI faces is energy consumption. The calculations enabling AI use a huge amount of electricity, and demand is expected to increase significantly.
Electricity demand from data centers is expected to increase by 300% over the next decade. This growth will benefit companies providing power. Three stocks particularly well-positioned to benefit are Bloom Energy (BE 3.19%), Dominion Energy (D -1.31%), and Brookfield Renewable (BEP -1.27%) (BEPC -1.59%).
1. Bloom Energy: Quick Power Solutions
Bloom Energy provides power quickly through its “solid oxide platform for distributed generation of electricity.” It manufactures hydrogen fuel cells in a factory, enabling fast delivery. The company has a significant backlog of $2.5 billion in products and $9 billion in services, indicating strong demand.
2. Dominion Energy: Strategically Located
Dominion Energy is a regulated utility with a monopoly in its service regions, including key parts of Virginia, a major data center market. Recent data center hookup requests increased by 88% in under six months. This demand is likely to translate into approved rate hikes and capital investment plans, driving earnings growth of 5-7% annually.
3. Brookfield Renewable: Clean Energy
Brookfield Renewable focuses on clean energy, with a diversified portfolio of hydroelectric, solar, wind, and battery power. It has a 10.5-gigawatt deal with Microsoft to support AI data centers and is in talks with other companies. This positions Brookfield Renewable for growth in both clean power and AI.
These three stocks offer alternative ways to invest in AI without directly buying AI stocks. They provide exposure to the growth of AI while potentially avoiding the volatility associated with direct AI investments.
