S&P/ASX 200 Index (ASX: XJO) investors looking to tap into the growth potential offered by the ongoing AI revolution might think of stocks like data centre developer NextDc Ltd (ASX: NXT).
Or maybe All Ordinaries Index (ASX: XAO) AI chip maker Brainchip Holdings Ltd (ASX: BRN) stock.
While both of these companies offer significant growth potential, there's another sector outside of tech that looks set for a big revenue boost amid the rapid evolution of artificial intelligence.
Namely energy providers.
Why?
Image source: Getty Images
AI needs a home too
Outside of the ones that provide welcome rain showers, there's no such thing as 'the cloud'.
Instead, AI depends on data centres. And the new generation of AI-enabled data centres is expected to dwarf the amount of energy used by traditional centres, offering a big potential boost for ASX stocks that provide that energy.
Earlier this month, NextDC CEO Craig Scroggie said the new data centres it has in the pipeline will suck up 10 times as much energy as the company's current facilities.
"We're going from general purpose computing to high-performance computing. That will see a generational change both in the scale and the density of computers," he said.
Indeed, the same story that could fire up the two ASX AI stocks we'll look at below is playing out across the world.
According to Manju Naglapur, general manager for cloud, applications and infrastructure solutions at Unisys Corp (quoted by Bloomberg):
Power demand from data centres has already been humongous, then came the AI hype and the need for power skyrocketed. With all the money spent on data centres, the power consumption will increase massively.
Commenting on the positive turnaround in investor sentiment towards utilities stocks in the United States, Ryan Levine, who heads utilities coverage at Citigroup Inc said, "The AI narrative is capturing the biggest amount of investor interest. It has the potential to be the biggest driver of the industry."
How big?
According to Exelon Corp CEO Calvin Butler, AI is set to spur a 900% jump in power demand from data centres in the Chicago area.
But as with ASX utility stocks, tapping into that AI-fuelled growth in the US will require upgraded grid infrastructure.
Walter Todd, chief investment officer at Greenwood Capital Associates, said:
This is going to be a real challenge for traditional utilities. The real beneficiaries of this data centre electricity usage are those that will benefit from money spent to upgrade the grid."
Which brings us to…
Two ASX stocks to ride the AI growth curve
I think both AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG) are well-placed to benefit from the huge energy demand spike coming from AI data centres.
Both ASX 200 utility stocks have already posted strong gains over the past 12 months.
The AGL share price is up 12% since this time last year. And shares in Origin Energy have gained 16%.
And both 'ASX AI stocks' pay some juicy dividends.
AGL trades on a fully franked trailing dividend yield of 5.1%. Origin Energy shares trade on a fully franked trailing yield of 4.9%.
Over the medium term, I expect both ASX stocks could enjoy further share price gains and increased dividend payouts amid the massive growth in energy demand from AI-capable data centres.
