Where I see opportunity with an 'Energy Supercycle'
Continuing my coverage of the highlights from last week's 20th annual Value Investing Seminar in Italy...
Today, I'll share a big investment theme I'm excited about right now: I believe we're in the early stages of an "Energy Supercycle" that's part of a larger commodity supercycle that could last for decades.
Here's an interesting chart I shared in my presentation at the event that captures this:
You can see that commodities have bounced off the depression that bottomed during the pandemic... but if you look at the long-term trend line based on prior peaks, they still have a long way to go over the next two decades.
In particular, electricity demand is exploding – driven by the data centers needed to power AI (an AI query consumes roughly 10 times the electricity as a routine Google search), as you can see in this chart I shared in my presentation:
Incidentally, just a few weeks ago I visited Loudoun County, Virginia, in the far-western suburbs of Washington D.C. It has the highest median household income of any county in the U.S. – at $170,463.
Why? Mainly because it's the epicenter of "Data Center Alley," the highest concentration of data centers anywhere in the world – twice the capacity of Silicon Valley.
Everywhere I looked, there were massive buildings like these:
And I saw nearly as many under construction:
I've never seen anything like it.
Keep in mind that more people are shopping online, working remotely, and communicating via the Internet than ever before. Additionally, folks have been able to download more data than ever due to ever-increasing mobile Internet speeds.
As such, more data needs to be stored every year. And since the typical data center uses 10 to 50 times as much energy as a regular office building, this is putting massive pressure on the energy grid.
These data centers are critical to the development of AI, automation, autonomous vehicles, online transactions, and much more... and they need power.
That means demand for electricity is set to grow much faster than anticipated.
Sure, plenty of folks wish we could meet this big demand from renewable-energy sources alone. But that's just not possible today – and it won't be for many, many years.
As such, meeting this electricity demand will have to come from natural gas, coal, and nuclear energy.
As I explained in my June 17 e-mail, I've already been bullish on nuclear energy to help meet the demand.
Meanwhile, the use of coal as a source of electricity is on the decline in the U.S.
But the other source – natural gas – is the other area where I see big investment opportunity...
In fact, by itself, natural gas is used to fuel 43% of America's electricity.
This chart from a report my team here at Stansberry Research put together shows natural gas consumption in the U.S. over the past few years (the red line is average U.S. monthly natural gas consumption – which is higher in the winter – and the straight lines are average U.S. annual natural gas consumption):
Since 2018, natural gas consumption here in the U.S. has increased by an average of 4% annually. Last year, the U.S. consumed 89 billion cubic feet per day ("bcf/d") of natural gas – the most on record.
There's no way around it – we'll need natural gas to help meet America's incredible demand for electricity.
And here at Stansberry in our Commodity Supercycles newsletter, my team and I have identified our favorite ways to take advantage...
We recently published a special report entitled "The AI Currency Source" with all the details on our top three stocks in the space. (Commodity Supercycles subscribers can access it here.)
If you aren't a subscriber, you can find out how to gain immediate access to this new report – and learn more about this megatrend in energy and other ways to take advantage – right here.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.