Eager to Profit from the AI Revolution? This Company Thoughtfully Positions itself as the Ideal Candidate to Amplify Gains from this AI-driven Mega-Trend.
Artificial Intelligence (AI) relies on substantial computing capacity provided by specialized chips, which consume significant energy. Often, these AI chips need up to five times more power than standard chips. Consequently, the coming decades will necessitate a vast quantity of electricity.
Promoting the AI expansion will require an all-round strategy. Although renewable energy will be crucial in providing sustainable power to AI data centers, it may not suffice to meet the enormous requirements. Thus, natural gas is poised to play a pivotal role in driving AI progression.
This development is favorable for firms that manage substantial natural gas infrastructure, such as Energy Transfer (ET, down 1.17%). The leading midstream company views itself as well-positioned to exploit AI's energy-hungry demand. Investing in Energy Transfer promises an enticing means for investors to capitalize on the AI boom.
Essential fuel
During the third-quarter master limited partnership's (MLP) conference call, Energy Transfer co-CEO Thomas Long outlined the significant opportunity in gas power generation. "Given the predicted AI and data center growth leading to rising electrical requirements and enhanced grid dependability becoming increasingly vital, it is evident that natural gas will play a significant part in fulfilling this demand," he stated.
Data centers necessitate substantial power and a steady supply. AI data centers demand uninterrupted 24/7/365 electricity. Natural gas can supply their base power requirements, while renewable energy can only do so with costly battery storage for backup due to inconsistency.
Energy Transfer is uniquely placed to capitalize on this trend and boost natural gas demand growth. "Given Energy Transfer's extensive interstate and intrastate natural gas pipeline network, we are the best suited to capitalize on the anticipated rise in natural gas demand for AI data centers, natural gas power plants, and industrial and onshore manufacturing for decades to come," Long stated.
Speeding up demand
The MLP has already observed an upsurge in demand. Long reported during the call that "We have never witnessed such activity from a demand perspective, and these opportunities are widespread across our gas network, from Arizona to Florida and from Texas to Michigan."
He then highlighted certain developments. Long revealed that the company already transports natural gas, both directly and indirectly, to about 185 power plants in 15 states via pipeline. This figure could substantially increase in the coming years. He said:
We have received requests to connect to around 45 power plants that we do not currently serve in 11 states, these accumulative power plant gas loads could reach up to 6 Bcf per day. Besides, we have received requests from over 40 prospective data centers in 10 states. These data centers, in aggregate, could consume gas loads up to 10 Bcf per day.
This represents substantial additional gas demand. Last year, the U.S. consumed approximately 108 billion cubic feet (Bcf) of natural gas daily. Energy Transfer alone could potentially service more than 10% of the country's daily natural gas usage with this increased demand from power plants and data centers.
The surge in gas demand would boost the use of its existing pipeline network and allow the company to construct additional pipeline capacity. These growing volumes are expected to increase its revenue.
What's more, the company has begun constructing eight 10-megawatt natural gas power plants in Texas "to support our operations and increase system reliability for Energy Transfer and our Texas customers," Long stated during the call. They could potentially build more of these smaller plants to meet their own growing energy requirements and those of their clients in the future. These plants will reduce their costs and boost their revenue.
Powering the AI revolution
AI will require ample power in the future, driving an increasing demand for natural gas. Given its extensive natural gas infrastructure, Energy Transfer feels it is optimally positioned to capitalize on this opportunity. It's currently experiencing demand beyond what it has experienced before, which should result in impressive future expansion. This development should provide the MLP ample fuel to boost its lucrative distribution, currently yielding around 7.5%. This union of income and growth makes Energy Transfer an appealing investment opportunity for those comfortable with investing in an MLP that sends investors an annual Schedule K-1 Federal Tax Form.
Investors seeking to capitalize on the AI boom might find investing in Energy Transfer appealing, as the company's extensive natural gas infrastructure positions it well to meet the escalating energy demands of AI data centers.
Given the reliance of AI data centers on a steady and uninterrupted supply of electricity, natural gas becomes an essential fuel due to its ability to provide base power requirements, while renewable energy can only do so with costly backup storage due to consistency issues.
