Editor's note: Everyone is talking about faster chips and smarter AI models. But the AI build-out doesn't work without power. In this issue, Ethan Goldman of our corporate affiliate Chaikin Analytics explains why electricity has become AI's biggest constraint... and how the companies helping to modernize the grid could benefit the most from this trend.
AI is still a dominant story on Wall Street...
The headlines often talk about faster chips, better AI models, or the billions of dollars the biggest companies are pouring into data centers.
AI development has been the top priority of the tech sector for several years... especially when it comes to advanced chips and processing power.
But the AI build-out is facing a looming roadblock.
For a year now, the energy AI requires has been overloading our essential systems. This is creating a shortage that could slow down the boom.
But just like we've seen with the tech sector, AI development is an increasingly important government priority, too...
That's why one government agency is stepping in to keep things moving.
The Government Is Demanding These Companies Keep Up
Folks, this new shortage is in electricity...
Without power, the chips that new AI models rely on won't even boot up. And with electricity demand surging each year, our failing electrical grid can't keep up.
On June 18, the Federal Energy Regulatory Commission ("FERC") got involved.
FERC ordered electric-grid operators under its control to review their processes for "large energy users."
Of course, that includes data centers.
Operators have 60 days to either justify their current procedures or outline how they'll update their processes. The goal is to connect data centers as quickly as possible without putting the grid – or consumers – at risk.
FERC has asked these grid operators to update their current equipment with "advanced transmission technologies" – basically, modernized devices and software systems.
In short, the U.S. power grid is aging. So, while we're building new capacity, we can also update the infrastructure that's already there. High-performance conductors, power-flow controllers, and other tools can improve the current grid's performance.
This would help operators deliver better service while the country works toward a long-term energy solution.
FERC even suggested new guidelines for data-center companies building their own power plants.
And as grid operators look to satisfy FERC, money will continue to flood into one group of stocks...
FERC Will Push Money Into This Already 'Strong' Industry
I'm talking about the electrical-equipment industry.
Each company in this area could play a critical role in rejuvenating the American electrical grid. Money will pour into these stocks as FERC pushes grid operators to modernize.
Today, the Power Gauge sees this as a "strong" industry. Take a look...
Out of the 88 stocks in this group, 47 of them get "bullish" or better ratings right now... But that doesn't mean you should rush out and buy every stock in this category.
Put simply, there are many opportunities to make money in this space. However, there are also a few "traps" that could seriously damage your portfolio.
Remember that headlines don't pick winners. More goes into a strong stock than a news article.
Our Power Gauge system distills 20 unique factors across four distinct categories into one easy-to-understand rating. The ratings range from "very bearish" to "very bullish." At Chaikin Analytics, we hunt for "bullish" or better stocks that are likely to outperform the market in the next three to six months.
Overall, this corner of the market is a great area to watch as the AI boom continues. Companies that can successfully capitalize on this grid upgrade will reap the rewards.
Good investing,
Ethan Goldman
Editor's note: The market's biggest winners often seem obvious... after they've already soared. That's why Marc Chaikin, founder of Chaikin Analytics, helped create a system to look "back in time" and spot the next wave of opportunities before they take off. His new AI-powered system was designed to compare today's companies with some of history's biggest stock market winners – and uncover opportunities most investors are still missing.
Further Reading
America appears to have plenty of power-generating capacity. The problem is that much of it isn't available when it's needed most. As AI drives a surge in round-the-clock electricity demand, the gap between capacity and reliability is becoming increasingly important.
Every major technology breakthrough follows a familiar pattern. First comes skepticism. Then adoption. Then widespread dependence. AI appears to be moving through that same cycle today... creating opportunities for investors who recognize the trend before everyone else.