Here’s how investors in AI Power Consumption are earning explosive returns

Today’s issue in preview:

• Here’s how investors in AI Power Consumption are earning explosive returns

• One stock for getting into “the next big AI trade”

• Baby Boomers are set to pour trillions of dollars into this industry. Here’s how to get your share of it.

• Our incredible track record gets even better: Recommendations to own AI infrastructure, Power Grid Upgrade, AI Chemicals, and oil stocks soar to new highs.

Here’s how investors in AI Power Consumption are earning explosive returns

Yesterday, after market close, leading AI Power Consumption firm Bloom Energy (BE) reported extraordinary quarterly results. Revenue increased 130% over the prior year. Earnings increased more than 1,000% from the same quarter a year ago.

The news powered Bloom to an explosive 23% gain today and an all-time high. The stock is up 59% since we last highlighted it in February.

Bloom Energy manufactures the Bloom Energy Server – aka “Bloom Box” – a transportable power generation system that converts fuels like natural gas into electricity. Bloom Boxes are in very high demand among AI data center operators because they allow data centers to reduce their reliance on strained electric power grids.

Regular readers know one of the largest and most profitable facets of the AI megatrend is power consumption. Thanks to AI’s enormous promise, giants like Google, Meta, Microsoft, and OpenAI are spending trillions of dollars on data centers, AI chips, and other infrastructure components.

All that AI infrastructure is poised to consume huge amounts of electricity. Goldman Sachs forecasts global data center power demand will surge 220% by 2030 compared to 2023 levels. U.S. data centers already account for 7% of U.S. electric power consumption, a figure that is expected to rise significantly.

This demand is driving a big bull market in virtually every form of electric power production. Bloom Energy’s incredible earnings and stock price spike represent fresh confirmation of our thesis.

The giant business and technological trends that shape our world play out over years, not months. This means the financial market trends they manifest tend to persist for years, not months. It also means new all-time highs are often followed by more all-time highs. Trends tend to persist, and winners tend to keep on winning, and Issac Newton was right: An object in motion tends to stay in motion.

This means that despite the huge gains since our original recommendation to invest in the AI Power Consumption boom, Money & Megatrends is still bullish on this theme… and still long.

One stock for “the next big AI trade”

Credit: Sumedha Lakmal

Ever since OpenAI’s ChatGPT program was released in late 2022, AI has been the driving force behind an extraordinary series of stock winners.

AI semiconductor leader Nvidia (NVDA) climbed 940%. AI data center cooling giant Vertiv (VRT) climbed 2,000%. AI infrastructure leader Lumentum (LITE) climbed 1,200%. AI defense leader Palantir (PLTR) climbed 1,700%. Computer memory leader Western Digital (WDC) climbed 1,450%… and the list goes on.

Given these enormous returns and AI’s potential to change the world, it makes good sense to think about what the next big AI trade themes will be… where the next Vertiv and Lumentum will come from.

We believe one of these themes is “Edge Computing”… that will power the “Agent Supernova.”

Now that leading AI firms have built useful “general purpose” AI programs and infrastructure, the “next big thing” in technology will be getting fully operational, incredibly useful, and incredibly addictive AI installed on “the edge”… where our local devices can run it without having to communicate with centralized facilities.

For individuals, it means AI running on your phone, in your house, in your car, and on your medical devices. For businesses and governments, it means AI running in factory robots, fighter jets, diagnostic equipment, spacecraft, satellites, warehouse robots, and local servers.

This is where AI will achieve mass adoption. This is what will usher in the “Agent Supernova” megatrend, in which AI programs autonomously perform work that only humans can do now. Soon, we will see an explosion of AI agents performing work in factories, ships, airplanes, labs, offices, hospitals, building sites, stores, and schools.

This big shift to “the edge” – where many of our AI gents will run – will likely create another round of giant stock market winners over the next 2-3 years.

One imperative that should drive business and stock winners is that hundreds of millions of existing devices will need to be replaced or rebuilt with hardware capable of running AI locally. This means new semiconductor chips, new computer memory, and new connectivity components.

One company poised to benefit from this megatrend is Synaptics (SYNA).

Synaptics is a semiconductor chip designer with a $3.5 billion market cap. It designs chips for everyday smart devices like televisions, robots, home cameras, and security systems intelligent enough to sense, hear, see, connect, and respond.

Synaptics used to be a laptop touchpad business, but it has transitioned into hardware for Edge AI because of the opportunities ahead. And the numbers are starting to show that this was a smart move.

Synaptics’ Core IoT segment (the division most closely related to Edge) is growing 53% YoY while the wider business is growing double digits. Importantly, it’s doing this very profitably with earnings per share rising 32% year over year.

Core IoT (Edge) accounts for around 31% of Synaptics’ current revenue, with 53% from enterprise and automotive and 16% from mobile touch. So, the Edge AI thesis is still roughly only one-third of the business. However, management expects this 31% portion to continue growing.

A three-year chart of SYNA shows the stock has not exploded higher as many semiconductor stocks have recently done. Edge Computing plays have yet to be fully rewarded. However, if you’re looking to build a position in “the next big AI trade,” SYNA is a good place to start.

Baby Boomers are set to pour trillions of dollars into this industry. Here’s how to get your share of it.

Credit: RiverNorthPhotography

Four months ago – on January 1 – the first member of the enormous Baby Boom generation turned 80 years old.

Members of this generation were born between 1946 and 1964. Its size and total wealth make it one of the most powerful economic forces in all recorded history. As more baby boomers turn 80, America’s 80-plus population is projected to double from 14.7 million in 2025 to 29.4 million in 2045.

Boomers are now in the phase of life where spending money on health care and longevity skyrockets. For many boomers, a typical month involves going to see at least one doctor to have something looked at, something removed, or something treated.

This demographic spending tsunami is a huge opportunity for well-positioned businesses and investors. Many health care fields are experiencing huge demand now – and will for at least the next decade. Thus, for years, I’ve described investing in this theme as “investing with a gale force tailwind” at your back.

That’s our bull case anyway. But far more important than our analysis or anyone else’s is what the market thinks about it. You or your investment guru can be maximum bullish on a trend all you want, but if the market disagrees with the thesis by sending its price lower, then your idea isn’t worth a hell of a lot.

In the case of Boomer Health Care, the market approves. To demonstrate this megatrend in action, we look to the booming senior living and care industry. This is a huge business comprising nursing homes, assisted living communities, and specialized nursing services. Many of the largest businesses here are structured as Real Estate Investment Trusts (REITs).

REITs own, operate, or finance income-producing real estate – such as apartments, office buildings, shopping centers, warehouses, or data centers – and allow investors to buy shares in that real estate portfolio.

In this industry, Welltower (WELL) is an 800-pound gorilla. It’s the world’s largest owner/operator of senior living facilities. The company says it owns or has investments in over 2,500 properties. This week, the company reported its first-quarter results. Normalized Funds From Operations (FFO) – which are like “earnings” for REITs – increased 23% year over year. The company’s revenue exceeded Wall Street expectations. As a result of this strong performance, Welltower reached a new all-time high.

The Boomer Health Care theme is no short-term “flash trend.” It’s a glacier-like, 10+ year megatrend that will direct rivers of money into various health care businesses. Getting positioned to benefit from this trend is very likely to be one of the most financially rewarding activities for investors.

Market Notes

• Our recommendation to ignore the AI bears and stay long the AI boom continues to pay off. Leading computer memory players Western Digital (WDC) and Seagate Technology Holdings (STX) reached new all-time highs.

• Our recommendation to invest in chemical firms that benefit from AI is yet another winner for readers. Element Solutions (ESI) spiked 10% today after reporting terrific earnings driven by AI infrastructure demand. The stock is up 29% less than two months since our recommendation.

• Our recommendation to invest in the giant Power Grid Upgrade continues to pay out like a broken slot machine. Electrical equipment maker Preformed Line Products (PLPC) reached a new one-year high today.

• Shipping leaders are hitting new highs. Scorpio Tankers (STNG), BW LPG (BWLP), and Hafnia (HAFN) all hit new highs today.

• Our October 23rd recommendation to go long oil stocks is still paying off. Cenovus Energy (CVE), Halliburton (HAL), and Baytex Energy (BTE) all hit new highs today. CVE is up 130% over the last year.

• Our February 13th recommendation to own NXP Semiconductors (NXPI) was well timed. NXPI just hit a new high and is up 23% today post-earnings.

Regards,

Brian Hunt
Editor, Money & Megatrends

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