Data centers may drive the grid into a 'brick wall.' These stocks benefit

Morgan Stanley predicts that manufacturers of small, quickly deployable natural gas turbines and generators will benefit from the increasing electricity demands of data centers. These demands are expected to exceed the capacity of U.S. power grids by 2025, leading to significant grid connectivity challenges. Companies like GE Vernova and Siemens Energy, which produce aeroderivative gas turbines, along with Cummins and Caterpillar, which make natural gas-powered generators, are likely to see increased investor interest.

According to Morgan Stanley analysts, U.S. power grids are expected to face significant challenges by 2025 due to the rapid increase in demand for electricity from data centers2. The analysts predict that by 2025, the magnitude of proposed data centers will "greatly exceed" the capacity of utility companies and grid operators to connect these projects to electrical supplies1. This scenario is described as hitting a "brick wall," indicating a severe shortfall in grid connectivity that could impede the operational deployment of new data centers. The situation is particularly acute in Texas, where the demand for connections to the state’s grid has surged dramatically, from 17 gigawatts to about 40 gigawatts in less than two years6. Additionally, there is an extensive wait time for diesel-powered, backup generators for new data center projects, further complicating the energy supply challenges.