VST - The Challenge Of Powering AI
2024-05-08 05:31:49 ET
Summary
- The accelerating pace of power demands among artificial intelligence aspirants is underappreciated and will involve a rising pull on already stretched energy resources.
- At some point, the accelerating growth trajectory embedded in many of these AI beneficiaries could meet the more plodding and linear real-world reality, driving a major resetting of expectations.
- The shift toward higher power pricing is one of the most powerful fundamental tailwinds for capital-intensive cyclical stocks supporting the AI buildout - creating an exploitable underreaction for value investors.
By Sam Peters, CFA and Reed Cassady, CFA
The Lifeblood of AI Infrastructure is Electricity
The market is focused on the transformative potential of artificial intelligence ((AI)) but, in our view, has not come fully to grips with the real-world bottlenecks attached to this emerging technology. While markets appear to be increasing the supply of leading-edge graphics processing units to meet accelerating demand, new pinch points have emerged as the AI arms race gains pace. These include sourcing data center sites, lining up connections to the electrical grid and obtaining cooling equipment. While we believe markets will eventually find a solution to most of these impediments, the lifeblood of this AI infrastructure is electricity, and access to the electrical grid and power generation capacity will likely prove to be more durable headwinds....
The Challenge Of Powering AI