Editor's note: A strong signal is coming from the AI sector... And most of the market is still clueless. This corner of the market has been scrambling to build its energy infrastructure. And it needs all the help it can get. That's why, despite being a controversial resource, natural gas is still in high demand. And according to Joel Litman, the chief investment officer at our corporate affiliate Altimetry, that trend isn't slowing down anytime soon. In today's Masters Series, originally from the July 1 issue of the Altimetry Daily Authority e-letter, Joel explains why natural gas companies are going to be a key part of the AI build-out...
AI's $3,000 Power ProblemBy Joel Litman, chief investment officer, Altimetry AI is reshaping North American power markets... In fact, it's turning electricity into one of the hardest assets to secure. AI is also creating a natural gas "renaissance" after decades of limited new development. According to Brandon Freiman – a partner at global investment firm KKR (KKR) – the power sector has moved from years of flat demand into a new growth cycle... with AI as a key driver. Costs are skyrocketing. New gas-fired plants, once priced at about $1,000 per kilowatt ("kW"), are now closer to $3,000 per kW. Developers are responding by requiring long-term contracts with utilities and industrial customers before putting capital to work. Today, we'll explain why AI-driven electricity demand is creating a durable tailwind for natural gas infrastructure... and why one company is better positioned than the market expects. The demand numbers are too large for one fuel source to handle alone... The International Energy Agency ("IEA") expects data centers around the world to consume around 945 terawatt-hours ("TWh") of electricity by 2030. That's roughly double today's level. And it represents a bit less than 3% of global electricity consumption. Keep in mind that the worldwide power supply grew only 1.8% per year between 2000 and 2023. The IEA also expects data-center demand to rise around 15% each year from 2024 through 2030... That rate would be more than four times higher than all other electricity demand. U.S. data-center electricity consumption is expected to rise by about 240 TWh by 2030, up 130% from 2024. Data centers could devour between 9% and 17% of the power generated each year in the U.S. by 2030. That growth needs power that runs every hour of every day... which is something wind and solar simply can't do.
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 'If Only I Had Listened Before July 10...' Joel Litman called Advanced Micro Devices at just $2 before it soared nearly 200X. Landon Swan called Nvidia at $21. Now, they've teamed up to reveal what they believe could be the next major AI opportunity... one with the potential to spark gains as high as 50X over the next 12 months. According to their research, this opportunity is being driven by three powerful catalysts... And one of them centers on a major move they expect President Donald Trump to make on July 10. Joel and Landon broke down the full story in a recent livestream... including the small group of stocks they believe could benefit most as this all plays out. Don't look back after July 10 and wish you had seen this sooner. Click here to get all the details (includes a FREE recommendation). |
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Between its scale and its reliability, we're not surprised that gas remains central to the AI build-out... Natural gas already supplies more than 40% of U.S. data-center electricity. That makes it the top energy contributor. Enterprise Products Partners (EPD) is one of the largest natural gas distributors in the country. The company's assets include more than 50,000 miles of pipelines, 300 million-plus barrels of storage capacity for liquid fuels, and 14 billion cubic feet of natural gas storage capacity. With AI demand booming, Enterprise's massive footprint gives the company a major advantage. That's because AI power demand is turning reliability into the key product. As we mentioned earlier, more and more power projects are securing long-term supply contracts before construction begins. Enterprise is getting ahead of this trend... It recently launched new processing equipment at its Mentone West facility, which is already under long-term contracts. Despite unprecedented demand, investors don't seem to think the good times will last... We can see this through our Embedded Expectations Analysis ("EEA") framework. The EEA starts by looking at a company's current stock price. From there, we can calculate what the market expects from the company's future cash flows. We then compare that with our own cash-flow projections. In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today. Enterprise has generated Uniform return on assets ("ROA") of around 12% in recent years, which is equal to the corporate average. At Altimetry, we analyze earnings with Uniform Accounting to avoid the distortions of traditional accounting methods. The market projects that Enterprise's Uniform ROA will fall below 9% over the next five years... even as AI-related power demand increases the value of reliable gas infrastructure. Take a look... 
Pipelines may be boring, but they're necessary... Enterprise doesn't need AI companies to overspend forever. It needs electricity demand to keep rising. And it needs data centers to want to power their operations with natural gas. That will make Enterprise's network of pipelines more valuable... with next to no additional investment. A threefold increase in the cost of building new gas plants makes existing infrastructure all the more important. A 130% rise in U.S. data-center electricity consumption by 2030 creates durable demand. And yet, investors aren't buying it. The AI trade has moved beyond chips and servers... It's reaching the pipelines and storage facilities that will allow natural gas to keep data centers running. That means the grid build-out is turning Enterprise's old assets into a hot commodity. Regards, Joel Litman
Editor's note: The U.S. and China have been fighting for dominance in the AI race. But three powerful catalysts could align in the coming weeks to push the U.S. toward victory... and trigger a $23 trillion stock market boom. That's why Joel joined forces with a special guest to reveal what's about to unfold... along with the details on the little-known stocks that they believe could explode as much as 50-fold in the next year. Click here for more details. |
