According to analysts ‘ projections, energy infrastructure is expected to be the next big area of focus for AI investors as they seek to power the highly energy-consuming data centers.
This comes as the demand for AI products and services continues to grow, subsequently pushing the demand for electricity to power data centers. According to the Financial Times, this is creating a new class of attractive businesses, that is energy providers.
As the tech firms become overvalued and too much for some investors, experts posit that there are other options in the AI wave. They argue that energy-related firms will be the next bet, although they may not be “as flashy as Nvidia’s semiconductors.”
Energy infrastructure firms tipped to do well
Reports show that energy consumption at AI and crypto mining data centers has been on an increase creating scope for the sector to look for sustainable energy use and green energy.
James West, a senior analyst at Evercore ISI told the Financial Times that investors were looking for “a next derivative in AI.”
“The technology investors that are calling us are asking about power.”
West.
“This is the next big bull market, especially as you have some of the other AI derivatives like the chips running out of capacity,” added West.
This comes as tech giants like Nvidia, a key player in the AI sector saw a decline in share price performance after its latest earnings report in August. According to West, it is hard for Nvidia to grow its earnings further because “their capacity tightens.”
West highlighted his top picks, that are likely to do well in the energy sector if the shift occurs to energy firms.
He cited GE Vernova, a power and energy division of General Electric, spun off into a separate entity. He also mentioned Fluence, a battery provider which competes with Tesla.
Renewable energy is fast growing
West added that while technology is fast growing worldwide, the same can be said about the renewable energy sector, which is experiencing exponential growth as investors begin to increase their attention towards it.
According to the International Energy Agency (IEA), renewable energy generated in 2025 across the world is expected to surpass coal energy for the first time.
However, this might not be enough to meet the fast-growing demand at data centers. Experts have proffered two options, the first being “re-carbonization” which refers to restarting or maintaining the fossil fuel power plants.
But, this might result in data centers contributing to carbon emissions significantly. Already, tech giants like Microsoft have seen a 30% jump in emissions between 2020 and 2023, driven by data centers. Google has also seen a jump in energy consumption at its data centers due to an increase in demand for AI services.
According to Thomas McAndrew, the founder and CEO of Enchanted Rock, a Texas-based microgrid provider, data centers need 99.99% reliable electricity, which puts a strain on the power grid. He added the high electricity demand at data centers was also putting pressure on residential consumers as well as increasing carbon emissions.
McAndrew revealed there is another option that tech firms might explore to offset the energy deficit by leveraging natural gas microgrids and battery storage.
“AI data centers can ease grid pressure and provide surplus power back to the grid, supporting the expansion of wind and solar, thus reducing costs and carbon emissions.”
McAndrew.
Founder and chief executive at Bloom Energy, KR Sridhar also told the Financial Times that while natural gas is hardly a zero-carbon fuel, this could be used to cut emissions and power data centers.