AI Revolution Spreads Its Wings: Power, Commodities, and Utilities Join the Surge

Nvidia Corporation (NASDAQ:NVDA) is grabbing headlines as it gears up to release its first-quarter 2024 earnings this Wednesday. This event comes exactly a year after its groundbreaking first-quarter 2023 earnings, which sparked a remarkable AI-driven rally within the chipmaking sector. Wall Street anticipates an impressive earnings per share (EPS) of $5.60 for Nvidia, a substantial increase from last year’s figures. Revenue is also expected to hit $24.59 billion, tripling last year’s performance.

As highlighted in a recent Bank of America analysis, Nvidia’s influence has been monumental. Over the last twelve months, the company’s market cap surged by $1.5 trillion, with its EPS growing by 617% year-over-year. Additionally, the frequency of AI discussions during corporate earnings calls has shot up by 186%.

However, the AI wave is now anticipated to ripple across broader sectors including power, commodities, and utilities, signaling a significant shift in the impact of AI technologies. Bank of America’s equity and quant strategist, Ohsung Kwon, CFA, noted, “It’s not just about Nvidia anymore.”

While Nvidia has been a significant driver of S&P earnings growth, contributing 37% over the last year, its projected contribution is expected to moderate to 9% in the coming months.

The burgeoning demand for AI data centers is set to fuel substantial growth in related industries. McKinsey estimates a yearly increase of 10-12% in global data center power demand from 2020 to 2030, a forecast that might be conservative given the pace of AI adoption. Bank of America’s Andrew Obin believes this new demand will benefit a diverse group of sectors, including power producers, grid equipment providers, pipeline companies, and those involved in grid technology. Key commodities like copper and uranium are also set to gain from this trend.

Vertiv Holdings LLC (NYSE:VRT), a company specializing in power and cooling solutions for data centers, has outperformed Nvidia by a staggering 300% since Nvidia’s landmark AI-driven quarter. Vertiv’s product portfolio, which accounts for about 75% of its revenue, positions it well to capitalize on the projected increase in global data center demand, which is expected to generate up to 152 GW by 2030, representing approximately 8% of the total US power demand.

Utilities are also poised to benefit from the increased power demands driven by data center expansion. According to Paul Cole of Bank of America, utility companies like Constellation Energy Corp. (NASDAQ:CEG), Public Service Enterprise Group Inc. (NYSE:PEG), Vistra Corp. (NYSE:VST), NextEra Energy Inc. (NYSE:NEE), and Dominion Energy (NYSE:D) are all likely to see significant gains from this sector growth.

This expansive view of the AI revolution’s impact illustrates its potential to reshape not just technology sectors but essential utilities and commodities, underlining a broad-based transformative effect on the global economy.