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AI Will Generate Gains for All Kinds of Energy Stocks

Hello, Reader.

Amidst the buzz and bright lights of the stock market’s obsession with artificial intelligence, many investors overlook a crucial factor…

The energy sector plays a pivotal role in powering this digital revolution.

And the actions of tech giant Alphabet Inc. (GOOGL) showcase this interplay.

The tech giant is investing billions of dollars to build new data centers, which are critical for AI training and development. As noted in a recent environmental report, the company’s AI-driven success accompanied a 17% increase in total data center electricity consumption in 2023. Furthermore, Alphabet’s carbon emissions rose 13% since last year and surged 50% since 2019.

That’s just one (admittedly very large) company.

The spike in electricity demand due to AI will only continue to increase, especially as tech giants like Google pour their resources into creating newer and bigger data centers.

So, in today’s Smart Money, let’s dig into how this energy consumption is good news for both renewables and gas producers… and their investors.

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Man who Picked Nvidia in 2019: “The Next 30 Days Will Be Critical”

Legendary trader Tom Gentile predicted the rise of Artificial Intelligence more than five years ago and gave his readers a chance to turn $10,000 into…

Almost $35,000 in shares of Meta… $42,600 in shares of Microsoft… and more than $325,000 in shares of Nvidia.

He’s now issuing this critical AI warning for the next 30 days.

A Natural Alliance

Last year, global investment in all forms of energy hit a record-high $2.8 trillion, according to the International Energy Agency (IEA). Of that total, fossil fuel investments accounted for about $1 trillion, while renewable energy investments accounted for the remaining $1.8 trillion.

Even though oil and gas investment trailed behind renewables, it is not going away. In fact, Alphabet’s recent carbon emissions numbers underscore the persistent and growing role of fossil fuels in powering our digital future.

By 2030, overall electricity demand is projected to surge up to 20%. AI data centers alone are expected to consume an additional 323 terawatt hours of electricity demand; that’s seven times greater than New York City’s 48 terawatt hours of electricity demand.

This massive uptick is likely going to ignite a natural gas boom.

Wells Fargo projects a seismic shift in gas consumption driven by AI’s significant energy needs. By 2030, daily gas demand could surge by a staggering 10 billion cubic feet (bcf). To put this in perspective, that would represent a 28% jump from the current 35 bcf/day used for U.S. electricity generation. This would boost the nation’s total gas consumption by 10%, pushing it well beyond the current 100 bcf/day mark.

Additionally, according to the newest Global Energy Perspective by the McKinsey & Co. research group, global natural gas demand is all-but-certain to grow for the next 15 years, and perhaps for as long as the next 30 years. Crude oil demand is also on track to continue growing for at least a decade.

A Sustainable Solution

Natural gas isn’t the only side of the energy sector getting a boost from AI demand.

According to a Goldman Sachs report released in April, the surge in demand from AI and data centers will be met by a mix of energy sources. While natural gas is expected to fulfill 60% of this increased demand, renewables would cover the remaining 40%.

However, analysts do warn that getting renewables up and running pretty much immediately faces hurdles. Wells Fargo analyst Roger Reed highlighted a key challenge: the time-consuming process of constructing power lines to transport green energy to data centers.

This infrastructure lag means that while renewables are part of the long-term solution for energy demand, they can’t single-handedly meet the surging demand in the short term.

However, the outlook remains a positive one for renewables. Judging from the grim share-price trajectories of “green” stocks, one might assume that renewable energy deployments around the globe are falling. But that’s not the case.

Last year, global solar photovoltaic deployments skyrocketed 85% year-over-year to a record-high 420 gigawatts (GW) of capacity. Combined with 2022’s deployment of 228 GW and 2021’s 168 GW, the world installed 816 GW of solar capacity during the last three years – or more than double the entire capacity the world had installed before 2020.

A rapid turnaround is unlikely, but a gradual turnaround is probably a good bet.

Renewable energy stocks have suffered such relentless selling pressure for the last three years that they reflect only doom and gloom. Therefore, many stocks in the sector could soar, as they begin to convert their profit potential into genuine profit growth.

So, while electricity-hungry AI giants like Alphabet, Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), and Meta Platforms Inc. (META)are currently signaling a natural gas boom, that surge is setting the stage for renewable energy’s resurgence.

As massive, trillion-dollar investments continue to flow into all forms of energy generation and storage – both renewables and fossil fuels – we investors do not need to “choose sides.” We can invest opportunistically in both renewables and fossil fuels.

To learn how to play both sides of the energy sector – and receive my latest recommendations – learn how to join me at Fry’s Investment Report. Look out for the July issue this Friday, where I’ll continue to examine AI and the other megatrends I’m following and their impacts… and make a new AI-related stock recommendation.

(If you are already a member of Fry’s Investment Report, you can log in here.)

Regards,

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Senior Managing Editor’s Note: Hurricane Beryl has left a path of destruction from the Caribbean to Texas and beyond. While the storm’s wrath is spent, the hard work of recovery, repair, and rebuilding is just starting. So, from all at The Freeport Society, our condolences to those affected by this natural disaster… and strength to you as you forge a new path forward.

–       Teresa B.

The Tragedy of Joe Biden

“Unimaginably worse than I ever could have thought possible.”

When Ray Dalio speaks, people tend to listen. And the billionaire founder of fund manager Bridgewater came out swinging in his Fourth of July message, posted on his LinkedIn page.

His slam wasn’t targeted at Joe Biden or Donald Trump (though, hey, if the shoe fits)…

No, Dalio was throwing his entire generation, the Baby Boomers, under the bus.

That’s a little unfair of him, considering some of the greatest entrepreneurs in American history were Baby Boomers, including Apple’s Steve Jobs, Microsoft’s Bill Gates, and even Amazon’s Jeff Bezos, who just barely squeezes into the generation (depending on who you ask). His birth year of 1964 makes Bezos either the tail end of the Boomers or the very beginning of Gen X.

But when it comes to the politicians of that generation… Dalio has a point. The Boomers running the country for the past 30 years have really run the place into the ground.

In Dalio’s own words,

I also saw the generation that came after the greatest generation (i.e., my generation) run up government debt, let the country’s infrastructure break down, allow huge polarities in opportunities and living conditions to develop which led to pervasive economic and social inequalities, homelessness, mental illness and drug problems, and the relative decline of America’s economic, military, and moral leadership in the world.

I will correct Mr. Dalio on one hairsplitting technical point…

Joe Biden isn’t actually a Baby Boomer. He’s just a couple years too old to have made the cut. For the demographic statistics nerds out there (yes, we’re out there, lurking among you), Biden is actually a member of the Silent Generation, those born between 1928 and 1945. But I digress…

The national debt is my bugbear. Debts in general are my bugbear.

I would rather kill myself before I left my children to pay debts I was irresponsible enough to run up. Such would be my sense of shame.

And yet our Boomer Commanders in Chief – George W. Bush, Barack Obama, Donald Trump, and honorary Boomer Joe Biden – have done exactly that. We, and our children, will be paying the interest on the debt these grifters ran up long after they’re dead and feeding the worms.

(Yes, I know Bill Clinton is a Boomer as well… but he is the only one of that motley crew to balance the budget.)

But Dalio is just warming up. He continues…

It is surrealistically shocking to me to see the condition the United States is in, such chronically horrendous leadership that has reached an apex in terribleness that is reflected in our two presidential candidates, our representatives in Congress, and how they deal with each other. They are so unimaginably worse than I ever could have thought possible.

“Chronically horrendous leadership” might actually be too generous. I’d say “the gaping vacuum where leadership was supposed to be” would be a better description.

Bill Clinton was our first Boomer president, serving from 1993 to 2001. And here’s a fun fact about Mr. Clinton: He’s two months younger than Donald Trump and four years younger than Joe Biden despite retiring from the presidency 23 years ago.

And this brings me to the tragedy of Joe Biden…

Biden came to office at a time when America needed a sense of normalcy. Trump’s four years, whether you loved him or hated him, were chaotic and loud even before the pandemic turned the world upside down. Biden could have come in and been the grandfatherly voice of calm, given us four years of low drama, and then retired on his own terms as a one-term president with his legacy and dignity intact.

Instead, he’s going to be remembered as the stubborn old fool who didn’t know when to quit. He’ll either lose the election or – as we predicted back in December – be forced out of the nomination in disgrace by his own party and replaced by a Shadow Candidate.

To borrow from Dalio again, it’s a situation “unimaginably worse than I ever could have thought possible.”And yet here we are.

I’d recommend you give my presentation with Freeport Society friend Louis Navellier a good watch. We lay out the risks that the Shadow Candidate brings and a roadmap for how to prepare. You’ll find it here.

To life, liberty, and the pursuit of wealth… despite who takes the White House next,

P.S. Lest you feel the need to rise up and defend old Joe, pause and understand that I do not paint a target on his back alone. I – as do we all here at The Freeport Society – believe that BOTH presidential candidates have already proven themselves wrong for the mantle of power they seek. We’re also acutely aware that none of the backups waiting in the wings are much better. That’s why it’s important to do everything in your power to protect your wealth and grow it as much as possible while you still can. Save the indignant outcries and focus instead on what matters most to you and your family: life, liberty, and the right to build your legacy.