Ed Cooks of Wood Mackenzie reports that generators see big opportunities in the rise of AI. Politicians in the US have concerns about the impact on customers. He writes:
The two best-performing stocks in the US S&P 500 Index this year have been server company Super Micro Computer and the chip-maker Nvidia, both beneficiaries of the excitement over the new possibilities for artificial intelligence. The third-best performer, with its shares up 130% since the start of the year, is Texas-based energy company Vistra, which is also benefiting from expectations of an AI boom.
Vistra is the largest competitive power generator in the US, with about 41 gigawatts of capacity, and so is well-placed to profit from a surge in demand for electricity driven by the rise of AI. Dan Loeb, billionaire founder of the hedge fund Third Point, argued in a letter to investors in April that because data centres for AI applications typically need a constant power supply, Vistra’s fleet of gas-fired and nuclear plants was “uniquely positioned to benefit”. Vistra itself has projected that its earnings from continuing operations will grow at an annual rate of about 18% between 2022 and 2026.
The new excitement over rising demand, and the need for baseload power to meet it, comes as the government in Vistra’s home state of Texas has been implementing its plan for subsidising investment in new generation capacity, with the aim of preventing blackouts. That plan, offering subsidies for new and upgraded gas-fired power plants, has been controversial, but is attracting a high level of interest from generators, in part because of those expectations of strong growth in demand. […]
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