Editor’s Note: For the past several months, we’ve been sharing the implications of artificial intelligence and our favorite ways to gain investment exposure. Editor Colin Tedards has been narrowing in on the hardware and software providers for this new technology. But there are other opportunities out there.
Today, we’re sharing an insight from income specialist and former real estate developer, Brad Thomas. As Brad says, the rise of AI poses a major challenge for America’s energy infrastructure. And it could prove to be an unusual way to profit from AI. Read on…
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You live in Virginia. Northern Virginia to be exact. Loudoun County, probably.
I don’t mean physically, of course. You could be anywhere in the world for all I know.
But your online identity? Your photos? The words you’re reading right now? That song you’re streaming in the background?
There’s a good chance that a big chunk of that is coming to you from a data center in Northern Virginia. 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%.
That’s because Northern Virginia has the highest concentration of data centers in the world. And most of them are in Loudoun County.
A recent report from real estate services company Jones Lang LaSalle estimates that 3,400 megawatts of data center capacity is located in Northern Virginia. That uses enough electricity to power over 2.5 million homes.
It’s three times larger than the next biggest data center hub in Singapore.
Companies love putting data centers in Virginia for several reasons. It has blazing-fast internet connections, few regulations and generous tax benefits. It also has mild weather and few natural disasters.
And most important of all, it has cheap and abundant power.
Actually, I should say it had cheap and abundant power.
Because the data centers in Northern Virginia are running into a big problem: They can’t get enough electricity to run their computers…
My primary focus is 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 show you how to profit from this situation while collecting a safe, reliable yield.
Virginia isn’t the only place with power problems. Data centers across the country and even in Europe are facing similar issues connecting to the grid.
It all boils down to one word: transmission.
Electricity produced at a power plant has to flow through a network of power transmission lines before it reaches 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 literally melt the wire.
That’s the problem data centers are running into. It’s not that there’s not enough power being produced. There just aren’t enough transmission lines to safely deliver the electricity to where it needs to go.
America’s aging power grid wasn’t built to handle the large amounts of electricity we’re demanding now.
And the problem is going to grow as companies start using artificial intelligence, which requires a lot more computing power.
Asking a question on ChatGPT is estimated to take between 3 to 30 times more energy than a Google search. Garter estimates that half of all cloud data centers will use artificial intelligence by 2025.
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 under construction across the U.S.
That means there’s plenty of future demand for power transmission to catch up with.
The federal government is well aware of the transmission bottleneck and is trying to help. The Department of Energy has $13 billion in grants and funding from the infrastructure bill to help modernize and build out the country’s power transmission network.
That money will flow to one sector…
This all adds up to a golden opportunity for utility companies to build more transmission infrastructure.
Since most utility company earnings are regulated based on the infrastructure assets they own – and not the amount of electricity they deliver – building large power transmission projects will boost their earnings for years to come.
One easy way to add utility companies to your portfolio is through the Utilities Select Sector SPDR Fund ETF (XLU).
This ETF holds a basket of the largest utility companies in America. The same companies that will be called on to fix this problem. And right now, XLU yields 3.29%.
You can also profit from this current trend with one of my favorite plays in the market right now.
I call it “Amazon’s Secret Royalty Program.” And it shows how to set up a royalty-like income stream from the growing demand for data centers – like the ones in Northern Virginia.
And even better, for those who decide to become members, I just revealed our favorite mission-critical utility company trading at a discount. I believe it’ll benefit from plugging the data transmission demand gap.
It yields 4.3% and has grown its dividend 18 years in a row. During that time, it has returned 53% more than XLU. With government funding and continued growth, it’s likely to continue beating those returns.
To find out more, click here.
This growing demand for new transmission infrastructure isn’t going away any time soon. And we can profit from it for years to come.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
