This industry is getting a boost from the AI race: Strategist

As investors await Nvidia's (NVDA) highly anticipated earnings report, Raymond James Managing Director Pavel Molchanov joins Market Domination Overtime to discuss how the utilities sector is benefiting from the artificial intelligence race.

"If data centers, for the first time in 20 years, create growth overall in US power demand, that is a very good thing for utility companies across the board," Molchanov explains. He anticipates growth between 2 and 3% per year as the AI race heats up. The strategist also points to specific areas of data center growth, like Virginia and Ohio, where electricity prices are more affordable.

He says that investors looking to get in on the AI utilities play should pay close attention to GE Vernova (GEV): "GE Vernova does everything for the grid: natural gas, nuclear, hydro, wind, and also all the infrastructure, so the transmission networks, the power software for utilities. This company does it all, and half of its revenue is recurring."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Melanie Riehl

Video transcript

Investors are indeed waiting for video earnings after the closing bell, tomorrow, stocks move higher on that.

The focus is on tech when it comes to A I.

But there's another sort of corollary surprising sector that is become an A I that we're talking about utilities.

As we pointed out earlier, it's the best performing sector this year.

Joining us now is the of Raymond James managing director focusing on renewable energy and clean technology about thank you so much for being here.

Appreciate it.

Thanks for having me.

So this line that people are increasingly drawing between the power that's going to be needed for things like data centers and the growth of A I and utilities, I guess first of all, just big picture, is this the correct conclusion that people should be drawing here?

I mean, after all, utilities are a regulated industry, how much upside are they going to see?

Utilities have regulated prices?

That is absolutely true.

On the other hand, the amount of electricity meaning the kilowatt hours that are used by the economy that is ultimately up to the economy.

So if data centers uh for the first time in 20 years create growth in overall us power demand.

That is a very good thing for utility companies across the board.

So volumes of their sales go up even though the price is fixed by state utility commissions.

So Paul's intrigue goes traditionally, if you thought of utilities and you know, you moved into them because you were hunkering into a defensive crouch, you know, it was the same reason you went to staples or health care.

But now it's, you know, it's a lot of people perhaps moving in because they wanna, they want exposure to that boom of interest in A I.

So should we think of pavel as it's both defense and offense?

Well, it's predominantly defense.

Let, let, let's be honest.

Um You, you know, when we talked about power demand growing in the United States, it's a big deal because we have not seen us electricity demand growing meaningfully for 20 years.

Uh That being said, that kind of growth we're looking at is, you know, between two and 3% a year, right?

So, you know, we're not, we're not talking about double digits, 2 to 3%.

That is a big change from virtually no growth since 2007.

Uh but it's still, you know, not, not exactly uh tech sector kind of growth.

Um And there has been talk that the uh power companies that will do the best are those that perhaps are in areas physical areas where you have a lot of data centers.

Is that how you see it playing out?

There's a lot of regional variability here.

Yes.

So Virginia, uh you know, data center alley around Washington DC, Ohio, another big place to some extent, Texas, not as much along the west coast.

Why?

Because in California power prices are very high and therefore the economics of data centers are just not as attractive.

So, you know, it's predominantly going to be in places where electricity is cheaper.

And you know, just to frame that California people pay uh you know, at, at the residential level 30 cents uh for electricity, national average is half of that.

It works a little bit differently in the in the commercial or enterprise market.

But you get a sense of how uh different these uh price structures can be depending on the state Palo, let's say you're a viewer, you're listening right now.

You're very curious.

You too would like to play the broader, you know, grid modernization trend one way to do it pavel you say is Ge Ver Nova, how come, why that name?

G Ver Nova does everything for the grid, natural gas, nuclear hydro wind and also all the infrastructure.

So the uh transmission networks, the power storage, the software for utilities.

This company does it all and half of its revenue is recurring.

So its services in addition to the equipment itself