Artificial Intelligence (AI) has emerged as a multi-trillion-dollar megatrend with vast potential to transform the global economy. According to a study by PwC, AI has the capacity to provide a $15.7 trillion boost to the global economy by the end of this decade. This staggering figure surpasses the current economic output of both India and China combined.
However, for AI to reach its full potential, it requires two crucial components: computing power and electricity. While much attention has been focused on the development of semiconductors and other computing technologies, the importance of power in enabling AI growth is often overlooked.
Data centers, which play a fundamental role in powering AI applications, are projected to consume 10% of the world’s electricity by 2030, up from the current 2%. This growth is equivalent to adding the entire electric generation capacity of the current U.S. power grid. While renewable energy will play a vital role in supporting AI’s power needs, it alone cannot carry the burden.
The view that cleaner-burning natural gas will be crucial in powering AI’s growth is gaining traction. Natural gas provides a reliable and steady source of power, unlike renewables, which are subject to intermittency issues. While solutions such as energy storage can alleviate some of these challenges, they come at an additional cost.
Furthermore, the natural gas industry has the potential to reduce its carbon footprint by utilizing carbon capture and storage technology. It can also produce lower-carbon fuels like blue hydrogen, which can power data centers.
As demand for AI grows, the need for natural gas power plants and related infrastructure is expected to rise. Natural gas pipeline companies like Kinder Morgan and Williams are poised to benefit from this trend. Kinder Morgan operates the largest gas transmission network in the U.S., transporting 40% of the country’s gas demand. Williams, on the other hand, owns the Transco pipeline and controls 8% of the U.S. natural gas storage capacity.
Growing gas demand in the future will drive the expansion of existing infrastructure and create new opportunities for these companies. Additionally, both Kinder Morgan and Williams offer attractive dividend yields, making them appealing investments in the natural gas infrastructure sector.
In conclusion, AI’s energy needs are projected to drive a surge in demand for power, and natural gas is well-positioned to play a crucial role in meeting this demand. With the expected growth in natural gas infrastructure, companies like Kinder Morgan and Williams present under-the-radar investment opportunities for investors looking to capitalize on the AI power surge.
