It takes a lot of energy to think.
Scientists say the brain uses 20% of the body’s energy.
It doesn’t take a rocket scientist to figure out that computers using artificial intelligence (AI) to “think” also use a lot of energy.
And that’s becoming a problem. Because AI is an energy hog.
Talking to ChatGPT uses about 10 times more energy than running a search on Google.
The data centers that power the internet are already struggling to get enough electricity to run all their computers.
The problem will get worse as more companies and customers start using more AI programs.
Here at the Intelligent Income Daily, we’re focused on finding the safest income investments on the market. When major trends are happening in an industry, we pay attention… and look for ways to profit.
Today I’ll explain why data centers can’t get enough power and why the problem won’t go away anytime soon. I’ll also give you two ways to profit from this situation while collecting a safe, reliable yield.
Why Data Centers Can’t Get Enough Power
If the internet had a brain, it would be in Virginia.
That’s because the state is home to the largest cluster of data centers in the world – nearly 48 million square feet of computing power.
Nobody knows for sure how much of the world’s internet data flows through Virginia. But it’s a lot. Estimates range from 30% to 70%.
Those computers use a huge amount of power – more than 3,400 megawatts. That’s enough to power over 2.5 million homes.
And that’s causing problems for the local power grid.
Electricity produced at a power plant has to flow through a network of power transmission lines before it reaches the homes and businesses where it is used.
But each power line can only handle so much electricity. If it gets overloaded, the massive amount of heat created by electricity flowing through can melt the wire.
Data centers in Virginia are using so much power that more transmission lines are needed.
And Virginia is not the only place running into power problems due to data centers.
Singapore, Ireland, and the Netherlands all recently paused data center construction over concerns about electricity use.
And the increasing use of artificial intelligence could make the problem worse. In order to “think,” AI programs have to do calculations using billions of pieces of data. That uses a lot of energy.
A recent analysis in the journal Joule estimates that over the next few years, AI server units could add up to 15,000 megawatts of electricity demand.
That’s more power than what bitcoin miners currently use.
And it doesn’t even account for the energy needed to cool the data centers. That could add another 40% to the power needed just to run the computers.
Consulting firm McKinsey expects electricity demand from data centers to double by 2030.
And despite the problem of not getting enough power in certain places, data center construction is still booming.
More than 2,300 megawatts of data center capacity is currently under construction across the U.S.
This all adds up to a golden opportunity for utility companies to build more transmission infrastructure.
Because it’ll be needed to keep up with growing power demands from AI in the future.
And the Department of Energy just launched its largest-ever investment in America’s grid.
How to Profit From the Data Center Demand for Power
There is now more than $13 billion in federal funding earmarked for modernizing and expanding the country’s power transmission network.
That means utilities are getting free money to build large transmission projects. And since most utility company earnings are regulated based on the infrastructure assets they own, building the power lines needed to bring power to data centers will boost their earnings for years to come.
And reliable growing earnings allow utility companies to reward shareholders with increasing dividends.
One easy way to add utility companies to your portfolio is through the Utilities Select Sector SPDR Fund ETF (XLU).
This exchange-traded fund holds a basket of the largest utility companies in America. The same companies that will be called on to solve the problem of rising electricity demand. Right now, XLU yields 3.4%.
You can also profit from this situation with one of my favorite plays in the market right now.
I call it “Amazon’s Secret Royalty Program.” It’s a little-known way to collect a royalty-like income stream from the data centers that run Amazon’s growing empire. To find out more, read on here.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily