This industry is getting a boost from the AI race: Strategist

As the AI industry grows, utility companies are seeing increased demand due to the power needs of data centers, according to Raymond James strategist Pavel Molchanov. He highlights that this growth, expected between 2-3% annually, is largely driven by regions like Virginia and Ohio where electricity is cheaper.

Molchanov suggests investors consider GE Vernova for exposure to this trend, as it provides comprehensive solutions for the grid, including natural gas, nuclear, and renewable energy sources, with a significant portion of its revenue being recurring.

Virginia and Ohio are highlighted as specific areas of data center growth in relation to the utilities sector due to several factors. Firstly, both states offer relatively affordable electricity prices, which is crucial for the energy-intensive operations of data centers. Secondly, these locations provide access to robust power infrastructure and a strong workforce. Additionally, Virginia has a significant presence of major cloud providers and tech companies, particularly in the Northern Virginia region known as "Data Center Alley." This concentration of data centers has created a thriving ecosystem, attracting more investment and development in the area.

Furthermore, both states have enacted tax incentives to attract data center investments. These incentives, combined with the factors mentioned above, make Virginia and Ohio appealing choices for data center operators and investors. The growth of data centers in these regions is expected to contribute to the overall demand for power, which in turn benefits utility companies. As a result, investors are taking an interest in utility companies that are well-positioned to support the growing demand for power from data centers, especially in regions like Virginia and Ohio.