When it comes to investing in artificial intelligence, investors are starting to look beyond technology and instead into real estate, energy, and utilities. Increasing data center power demands, which are surging due to the need to support the new world of AI technologies, are also fueling demand for data center component providers. The company said these include power producers, grid equipment manufacturers, grid technology providers, and commodity companies related to uranium and copper used in cables and power grids serving data centers. “The expected power usage of U.S. data centers under construction represents more than 50% of the electricity currently used in U.S. data centers. Even after these data centers are built, , some expect data center power consumption to double again,'' analyst Thomas Thornton wrote in a note Wednesday. “Demand for 'traditional' data center space remains strong, pricing power is real, and AI demand is still in its infancy,” Thornton said, adding that AI workloads' power usage is on average It pointed out that the growth rate is expected to increase. He said AI processing tends to be done in more power-hungry graphics processing units (GPUs), and the increasing power consumption of GPUs themselves is favoring newer data center designs. He added that For AI. Bank of America analysts say several companies, including Caterpillar Inc. and Equinix Inc., stand to benefit from data centers' rapidly growing power demands. Take a look at the stocks with buy ratings below. According to the company, Caterpillar is an “undervalued” company on this subject because it has a deep tradition of providing engines for backup power generation. Analysts noted that data centers continue to be a bright spot in Caterpillar's earnings even as other end markets slow, as Caterpillar's power generation division has outpaced the company's overall growth over the past four quarters. The company is a major manufacturer of diesel generator sets, and says it installs more than 450,000 kilowatts per year in data centers and hospitals. BofA added that management is increasing its own capital spending for the first time in a decade to meet data center power needs. Caterpillar stock has 7.6% upside potential, according to BofA's $385 price target. The stock has risen nearly 20% this year, but has fallen 3% in the past week. Analyst David Baden says REITs rated Buy, Digital Realty Trust and Equinix, are “starting to capture the very early beginnings of AI demand, but…are a big part of the overall opportunity.” “This is still to come.” Both companies expect strong sales growth this year, but they disagree on the bottom line, or net income. “While EQIX's strong revenue growth supports our Top Pick theme, DLR is more of a 'show-me story' in this regard. It was a slower growth story than the previous one,'' Baden said in the memo. “That said, investors are showing that they can come through this with the expectation of better growth in the future, given sales trends.” BofA said Digital Realty and Equinix's stock prices each We expect it to rise by about 24% to 33%. Digital Realty stock is up 1.7% since the beginning of the year, while Equinix is down 7.1%. Companies BofA is bullish on when it comes to data center infrastructure and power supply include software company Aspen Tech and electrical components maker Eaton. The company believes Eaton's stock could rise an additional 12.2% after rising more than 25% this year, adding: “We argue that the premium valuation is justified due to the expected upside.” The BofA analyst points to energy companies such as his Constellation Energy and Dominion Energy as other companies that will benefit from both data center growth and the power demand that comes with it. Indeed, analysts say demand for data centers will likely outstrip supply. As generative AI demands overlap with traditional data center demands, AI-related demands will occur in two phases: training and inference. Training new AI models requires power and cooling, and new data centers must be built to accommodate them. There is a need, they said.
