According to a recent report by Goldman Sachs, the demand for power from data centers is projected to surge by 160% by the year 2030. This increase is expected to have a significant impact on electricity needs, with growth rates unseen in over a century. As data centers expand, the power grid must undergo expansion as well, necessitating a diversification of energy sources to leverage gas, solar, and nuclear power effectively. This growth will also require an expansion of infrastructure to support the growing power grid.
The report highlights that the share of US power demand coming from data centers was 3% in 2022, with estimates indicating that it will rise to 8% by 2030. This translates to a compound annual growth rate of demand at 2.4%. In comparison, the annual power generation growth over the last two decades was under 0.5%, with the previous decade seeing no growth at all. This upcoming surge in demand is unprecedented since the start of the century.
Goldman Sachs estimates that around $50 billion in capital expenditure will be necessary to meet the escalating power needs, with 60% allocated towards gas and 40% towards renewable energy sources. The increase in demand for power will significantly impact the US power grid, prompting the exploration of three scenarios for data center power use over the next seven years.
Goldman Sachs has identified 16 buy-rated stocks that are poised to benefit from this booming demand for power from data centers. These stocks are categorized into companies that provide direct energy and storage services and those involved in building the infrastructure and equipment essential for supporting the expanding power grid. Some of the highlighted buy-rated stocks include First Solar (FSLR), Fluence Energy (FLNC), NextEra Energy (NEE), Vertiv (VRT), Kinder Morgan (KMI), and nVent Electric (NVT).
In conclusion, the projected increase in power demand from data centers presents significant opportunities for investors to benefit from this growing sector. With the right investments in place, companies operating in energy and infrastructure stand to gain from the surge in demand for power, signaling a promising future for the industry.
