AI's Power Problem
Something for bulls and bears... Another weak jobs report... The market expects rate cuts in response... A global gold breakout... The hard-asset stampede... The surge in your electric bill (and these utility stocks)...
There was something for bulls and bears today...
On one hand, shares of Google parent Alphabet (GOOGL) gained about 9% and lifted the benchmark S&P 500 Index and tech-heavy Nasdaq Composite Index higher by 0.5% and 1%, respectively. That came after a ruling in an antitrust case yesterday that will allow Google to keep its ubiquitous Chrome web browser.
On the other hand, another weak-looking U.S. jobs report this morning tempered enthusiasm about the broad economy, and the Dow Jones Industrial Average and small-cap Russell 2000 Index finished slightly lower.
The Labor Department's latest Job Openings and Labor Turnover Survey ("JOLTS") showed that available positions fell to 7.18 million in July.
That might sound like a lot, but it's the second-lowest number since the end of 2020... slightly edging out September 2024. You might recall that last September was that very same month that the Federal Reserve cut interest rates by 50 basis points, as the unemployment rate was rising at a pace that we've typically seen ahead of recessions.
What's old is new again... After today's JOLTS report and other recent labor market data that have pointed to another weakening jobs outlook, the market has increased its already strong bets on an interest-rate cut coming at the Fed's policy meeting of September 16 to 17.
Federal-funds futures today show traders putting a 95% likelihood on the central bank lowering interest rates by 25 basis points. That's up a few percentage points from yesterday and higher than the 80% odds a month ago.
That's both good and bad news. On the one hand, the central bank wouldn't lower interest rates if everything was great with the economy. But as long as it's not in direct response to a new crisis, lower borrowing costs can often be enough to juice asset prices, at least in the short term.
Longer term, there are other stories to consider...
As we frequently write, including yesterday, one of them is the continued devaluation of the dollar through falling interest rates and ballooning government deficits. To that end, the dollar's "hard asset" alternative of gold was up another 1% today to new highs.
This is a global breakout. Gold is making new highs against the U.S. dollar, but also against the Canadian dollar, the Japanese yen, the British pound, the Swiss franc, and the euro, as our friend J.C. Parets of TrendLabs highlighted on X today.
Gold miners and other precious metals stocks are similarly breaking out.
But there's another story that fewer people are thinking about in the commodity space... not just for today, but in the years ahead...
The energy secretary's top concern...
President Donald Trump has touted lower gasoline prices as evidence that his energy agenda is working, and the energy component of inflation data is falling year over year. But one part of the energy sector is still feeling the effects of inflation.
We're talking about electricity.
Unlike gas prices, these have not come down lately. After plateauing for years, electricity rates are rising sharply. In an interview yesterday with Fox Business, Energy Secretary Chris Wright said these costs are his top concern. From the interview...
It's what I worry about most, seven days a week. We want to stop the rise in electricity for Americans.
Just take a look at this chart of the electricity component of the consumer price index ("CPI") over the past 10 years...
You can see that electricity prices took off with broader inflation in 2021. But the broader CPI growth rate peaked in June 2022 and has slowed since. And electricity prices are still on the rise.
Over the past 12 months, the electricity component of the CPI is up 5.5%, double the 2.7% increase in the overall index.
We've only got AI to blame...
We've covered AI's huge power demand a few times in previous Digest editions. Put simply, heavy investment in artificial intelligence and data centers is going to use up a lot more power in the coming years.
As Commodity Supercycles editor Whitney Tilson and his team explained in the portfolio update of their June issue...
"Data Center Alley" in Northern Virginia alone hosts more than 3 gigawatts ("GW") of data center capacity with 94 facilities connected since 2019, making it the world's largest data center market.
Power market analytics company Aurora Energy Research estimates Data Center Alley will need an additional 11 GW of capacity – around 40% of Virginia's current peak demand – by 2030.
It's not just Northern Virginia that's seeing this demand. The Environmental and Energy Study Institute estimates that U.S. data centers could require as much as 130 gigawatts of power every year by 2030.
That's enough to power, on average, about 114 million homes for a year. And that's the equivalent of a huge chunk of all of the housing (148 million units) in the U.S.
Not only would this new demand be a huge draw on utilities, but it would also mean data centers accounting for 12% of all electricity used in the U.S. (versus about 4.4% at the end of 2023).
As Nick Koziol explained in an issue on our free Stock Market Trends website in July, "big tech companies have seen the writing on the wall" when it comes to their power needs. From that issue...
And they're investing heavily to secure power supplies for their data centers. Here are just a few of the investments...
- Microsoft (MSFT) locked in 20 years of power from Constellation Energy's (CEG) Three Mile Island nuclear plant.
- Alphabet (GOOGL) will pay to develop and construct several small, modular reactors to provide up to 500 megawatts of power.
- Amazon (AMZN) secured 1.9 gigawatts of nuclear power from Talen Energy (TLN).
- Meta Platforms (META) announced a 20-year partnership for 1.1 gigawatts of nuclear power from Constellation Energy.
New power capacity is on the way...
When power demand is higher than what utility companies can supply, they can raise prices. But if AI pushes electricity demand too high, it could place too much stress on the power grid.
Just last month, Alphabet agreed to lower its data-center energy usage during times of surging demand. Yes, data centers and AI need lots of power. But if they cause the entire grid to fail, that's even worse.
Utility companies are working to increase capacity, though. More from the June Commodity Supercycles issue...
As a result, U.S. power producers are scrambling to add to their power-generating capacity.
In our April issue, we covered how Constellation was buying privately-owned utility Calpine for around $29 billion – including debt – to help it capitalize on rising data-center electricity demand.
Calpine is the largest generator of electricity from natural gas in the U.S. – with around 27 GW of mostly natural gas capacity. The acquisition will make Constellation the largest independent power provider in the U.S., with nearly 60 GW of capacity.
Whitney continues by noting that Vistra (VST) – another huge utility company – is doing the same. Vistra acquired seven natural gas facilities totaling around 2.6 gigawatts of capacity for the same reason.
AI power demand will only rise from here. Big tech companies have only just begun to roll out their investments in new data centers. And that's a good thing for the utility companies providing that power – like Constellation and Vistra.
On the other hand, increasing power capacity will take longer. It means building new plants, new transmission lines, and even new nuclear reactors. So supply may not keep up with demand just yet.
That would likely mean the upward trend in electricity continues – and more sleepless nights for the energy secretary... and perhaps for people struggling to pay their electric bills.
By the way... Constellation and Vistra are just two of several stocks Whitney and the Commodity Supercycles team have recommended to benefit from the surge in power demand from AI. Subscribers who followed their advice are up 45% in Constellation and up more than 100% in Vistra.
Paid-up subscribers and Stansberry Alliance members can access the Commodity Supercycles model portfolio and our team's latest guidance about these stocks right here.
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In today's mailbag, feedback on the case about tariffs headed to the Supreme Court (and the White House's alternative plans)... plus a good question about bitcoin and cryptocurrencies generally, which our Eric Wade has an answer for... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"They [the White House] had a plan 'B' [with tariffs] because they knew damn well that plan 'A' was unconstitutional..." – Subscriber Michael S.
Hi, As Bitcoin has become such a success and is ultimately limited in number, what is to stop someone producing a Bitcoin Mark 2 [a second version] using the same processes?" – Subscriber Richard B.
Corey McLaughlin comment: Richard, great question. It's something that people who are new to bitcoin and cryptos should be asking, and our Crypto Capital editor Eric Wade answered this question in the Digest just last week. Here's what he said on the subject...
As Project Key Square (our government) and others pile into Bitcoin, what assurances do you have that the founders or keepers of the Bitcoin code wouldn't simply decide to make more Bitcoin?
Eric Wade: Absolutely none. That's the power, beauty, and appeal of bitcoin. It's open source and anyone can do anything they want to it.
Now, if you're genuinely interested in this subject, you'll be thrilled with what I say next. Changes in bitcoin's code have already happened – numerous times. When it happens, we either get new, better code or we get what's called a "fork" and an entirely new strand of code.
Bitcoin miners vote with their computers, and they can adopt this new code, ignore it, or even choose to run both the new and the old code. Are you aware that Bitcoin Cash forked away from bitcoin on August 1, 2017?
Leading up to and on that date, bitcoin's market capitalization was approximately $45 billion. It's worth noting that the market was highly volatile during this time, and bitcoin's market cap surged to more than $100 billion by the end of October 2017. Bitcoin is worth $2.2 trillion today.
If you're interested in the power of open-source software, I encourage you to dig even deeper into it.
If you're interested, you should also check out Eric's latest free presentation... He discusses the role digital currencies could play in reshaping the financial system, and how all this is central to a radical White House plan to fix the debt market.
It's what Eric calls "Project Key Square," as we mentioned above... He says it could be the catalyst for "the biggest trade in U.S. history" – and an opportunity people can get positioned for right now. Click here to learn more.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
September 3, 2025