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JP Morgan said the AI craze will spark a boom in power grid and electrical equipment companies around the world.
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Some stocks are already up 140% since the beginning of the year. The company says AI will increase electricity demand tenfold by 2026.
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Demand for electricity will further increase as countries race to reduce carbon emissions.
From microchips to cloud services, the investment frenzy around artificial intelligence is driving up the valuations of many sectors.
But the trend doesn’t end there. JPMorgan said in a note Wednesday that AI is also behind the boom in lesser-known power grid and electrical equipment companies, with some stocks rising by triple-digit percentages.
“Our analysts believe that global power grid and electrical equipment manufacturers in the U.S., India, South Korea and Europe will continue to receive new orders as expectations grow for power consumption to rise due to increased AI and data center development. “They’re up about 20% to 140% year-to-date, driven in part by an increase in demand for power and equipment,” the analysts wrote.
In fact, JPMorgan estimates that AI could increase electricity demand tenfold by 2026, representing a critical need for a reliable power grid and the equipment that runs it. Not only will the new technology require more data centers, but the power requirements for generative AI will be three times higher than current standards.
Citing previous published research, JPMorgan said it expects capital investment in global power grids to increase by more than 5% annually over the next decade.
Already, companies such as Taiwan’s Fortunate Electric and South Korea’s Hyundai Electric have soared 142% and 121% since the beginning of the year, JPMorgan highlighted. U.S. companies included include Eaton, which has risen 35% since the beginning of the year.
Apart from AI, these companies should also benefit from the global race to achieve net-zero emissions by 2050. Achieving carbon neutrality will require an estimated $20 trillion in grid investment between 2022 and mid-century.
Investors interested in the industry should keep an eye on stimulus from Asia, including guidance for new orders from Chinese companies and revisions to China’s power grid capital spending in the third quarter.
Analysts at the Bank said, “The global lack of investment in transmission equipment over the past decade has led to strong demand for transmission equipment, and China, which has technological and cost advantages and low geopolitical risk, has This could create opportunities for exporters.”
JP Morgan highlighted Sieyuan Electric, Huaming Equipment, and Hexing Electrical.
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