AI Spending Explodes

In March 2023, Microsoft (MSFT) founder Bill Gates wrote, “In my lifetime, I’ve seen two demonstrations of technology that struck me as revolutionary.” Gates, writing on his website, referred to the graphical user interface he witnessed in 1980, which would eventually be the ingredient needed for every modern operating system, including Windows. The second technological innovation that Gates referred to was OpenAI’s large language model (LLM) powered Chatbot, ChatGPT. Gates had asked his contacts to train the model to take and pass an AP Bio exam (Picking AP Bio because it required deep analysis, not simply memorization of facts). To his surprise, OpenAI’s ChatGPT did not only pass the 60-question multiple choice exam but also answered 59 of the 60 questions correctly.

Though large language models like ChatGPT are still being refined and “trained,” it is becoming abundantly clear to the world’s sharpest technologists that the next wave of innovation and growth can be harnessed through artificial intelligence. That’s why cash-rich “Magnificent 7” tech juggernauts like Meta Platforms (META) and Microsoft are spending billions of dollars on Nvidia (NVDA) chips and data centers to gain AI supremacy. According to IDC Research, worldwide AI spending will double by 2028 to a mind-numbing $632 billion, resulting in a compound annual growth rate (CAGR) of ~29%.

Data Center Energy Consumption Projections

Currently, AI is dominated by Mag 7 names due to the startup costs, such as GPUs and data centers, which are astronomical. However, the spending doesn’t stop once a data center is constructed. Data centers require massive quantities of electricity. In December 2024, the US Department of Energy (DOE) released a report stating that data center energy usage will “double or triple by 2028” (after doubling over the past decade. With an already vulnerable and overworked energy grid, big tech companies will be forced to source their own energy needs. Below are two reasons the energy sector is in the “sweet spot” over the next four years:

·       Supply & Demand: The US electric grid is near capacity, and The Electricity Reliability Council of Texas (EROC) was even forced to pay Bitcoin miner Riot Platforms (RIOT) more than $30 million to limit its electricity usage during a recent heat wave. Meanwhile, demand from data centers is increasing rapidly.

·       Regulatory-Friendly Environment: Last night, President Donald Trump wasted no time rolling out his energy-friendly agenda. Trump immediately declared a “National Energy Emergency” via an executive order that details the nation’s “inadequate energy supply and infrastructure.” In this executive order, Trump will ease restrictive regulations for energy producers.

BE: Serving the Here and Now

BE Company Overview

Zacks Rank #2 (Buy) stock Bloom Energy (BE) leverages natural gas and other fuels to create electricity through chemical reactions. BE’s technology helps data center operators and other businesses generate their own clean energy without needing to rely on the traditional electrical grid. As natural gas prices and the United States Natural Gas ETF (UNG) soar, BE is uniquely positioned to exploit the current market environment.

Mega-Deal Injects Life into Bloom Energy

On November 15^th, BE shares skyrocketed some 59% after the company announced a mega deal to supply up to 1 gigawatt of fuel cells to electricity utility American Electric Power (AEP). AEP will deploy fuel cells to AI data centers, which will potentially generate more orders in 2025. On the back of the deal, shares are set up in a rare but powerful high-tight flag pattern. Meanwhile, today, AI powerhouse Microsoft said it is open to using natural gas to power AI data centers to keep up with demand.

Bloom Energy Bucks the Market Weakness, Outperforms Peers

One of the most straightforward ways to identify a leader in an industry is to analyze it relative performance compared to the market and its peers. While AI energy industry peers like Constellation Energy (CEG) and Oklo (OKLO) have (understandably) succumbed to the market weakness, BE has merely chopped sideways – a show of relative strength.

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Wall Street Analysts are Bullish on Bloom Energy

Finally, Zacks Consensus Estimates suggest that Wall Street analysts are bullish on Bloom Energy for the foreseeable future. These analysts anticipate that EPS will jump a healthy 35.71% in 2025 and 89.21% in 2026.

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Bottom Line

The convergence of explosive AI spending and a shifting regulatory landscape creates a unique opportunity for Bloom Energy. Positioned to capitalize on the need for decentralized, reliable power, Bloom Energy stands to benefit significantly from the AI revolution’s insatiable energy appetite.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report

Constellation Energy Corporation (CEG) : Free Stock Analysis Report

American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Riot Platforms, Inc. (RIOT) : Free Stock Analysis Report

United States Natural Gas ETF (UNG): ETF Research Reports

Bloom Energy Corporation (BE) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

Oklo Inc. (OKLO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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