How to invest in AI power now—and what to avoid

Tech is leading the market again as the war in Iran recedes and first-quarter earnings come in strong. It’s a great sign for companies supplying the industry’s insatiable thirst for power generation and infrastructure.

Utilities plan to spend $1.4 trillion on capital expenditures through 2030, up 21% from estimates last year, according to the nonprofit PowerLines. The rising tide bodes well for companies supplying gas turbines, cooling systems, electrical equipment, and utility services.

Buying the stocks now means holding your nose on valuations. Turbine maker GE Vernova, for instance, trades at 43 times on 2027 consensus earnings estimates. Nvidia, by contrast, is a bargain at 25 times.

Yet avoiding the power stocks for being too pricey would have been a mistake. GE Vernova is up 38% this year. Vertiv, which makes cooling systems, is ahead 80%. Our value-investing reflex says a stock at 40 times has had its day; the market says otherwise.

For some perspective, we asked four portfolio managers for their views. Their consensus: Hang onto the power stocks, use pullbacks to add to positions, and consider utilities that aren’t as volatile and trade cheaper.

Powering the AI Arms Race

Utility capex is one of several signs that AI spending has plenty of runway. And the power can’t come fast enough.

More than 1,300 hyperscaler data centers are operating worldwide and another 800 are in development, according to JLL, a data center consultancy. The International Energy Agency expects global data center electricity demand to double by 2030 to 945 terawatt-hours.

U.S. Data Centers Could Require Up to 94 GW of Peak Power by 2030

More than half the growth is in the U.S., and there’s a scramble for power by any means—including fuel cells (Bloom Energy), refurbished jet engines (FTAI Aviation), and gas turbines (GE Vernova).

“If you have conviction that we still don’t know the AI of tomorrow, you can invest today,” says Stephen Yiu, chief investment officer of the London-based Blue Whale Growth Fund. Yiu says he’s exited software positions in the past 18 months and shifted capital into AI power, betting demand will only rise.

Vertiv is a top holding. Its backlog is up 109% over the past year to $15 billion. Yiu expects sales will grow by an average of 30% every year through 2028, eventually topping $23 billion, while share price grows at a slightly slower rate of about 20% a year given its high valuation.

“Our Vertiv numbers are ahead of consensus,” he says. “We expect earnings upgrades.”

Siemens Energy is another holding. The company is seeing huge growth in its turbine backlog, which makes up a major part of its $172 billion backlog, up 30% year-over-year. Turbine manufacturing capacity is fully booked through 2028.

Siemens isn’t nearly as pricey as GE Vernova. Shares trade at 28 times on 2027 estimates. Analysts expect a 37% jump in profits to €5.95 a share in 2027. The stock primarily trades in Germany but there’s an ADR: SMERY.

Stephanie Link, chief investment strategist at Hightower Advisors, is sticking with big AI power names: Vertiv, GE Vernova, Eaton, and Quanta Services.

The backlog story, she says, is too good to pass up. GE Vernova’s backlog grew 66% last quarter and stands at $150 billion; the company expects to be sold out through 2030 by the end of this year. Quanta, which handles data center and grid construction, saw its backlog rise 27% to $44 billion. The company recently raised its addressable market estimate from $940 billion to $2.4 trillion by 2030. Eaton’s electrical Americas backlog was up 29% over the past year to $13.2 billion.

“In my 35 years of investing, I’ve never seen backlogs like this,” Link says, expressing confidence that the stocks, while pricey, will live up to expectations. A small starting position makes sense, she adds, since earnings revisions are moving up. She’d wait for pullbacks to add sizable stakes.

AI Power Backlogs Are Booming

Better Bets Than Bloom

Chris Trout, director of equity research at Clearstead Advisors, has long owned Bloom but says he wouldn’t buy at today’s prices. Bloom is lining up orders for its fuel cells, which can power up data centers rapidly. The company announced a large new order from Oracle last week, adding to its backlog by an initial 1.2 gigawatts of capacity.

Yet the stock, up 2,000% in the last two years, trades at 103 times 2027 estimates and more than 50 times annual profits after that. Bloom is sold out through 2027 with no spare capacity. Trout has trimmed his position, awaiting updates from Bloom on its growth plans.

One name he bought lately is Valmont Industries. The company’s roots are in agricultural irrigation but three quarters of its $4 billion in revenue last year came from infrastructure products for energy, lighting, and other industrial uses. The company is expanding capacity to take advantage of the electricity buildout.

Trout sees Valmont benefiting from grid upgrades and doesn’t see the stock as overpriced. Analysts expect roughly 12% annualized profit growth over the next few years; at around 18 times earnings, the stock has a price-to-earnings-growth ratio of 1.5, which Trout says is reasonable.

David Reidy, an advisor with First Growth Financial, likes stocks such as Eaton and GE Vernova, despite their big gains and lofty valuations. “The worst mistakes I’ve ever made were selling my winners to buy my losers,” he tells Energy Insider.

But he’s looking for better values elsewhere. Two recent picks are utilities Alliant Energy and Entergy.

An AI Power Portfolio

Alliant serves customers across Iowa and Wisconsin, two states that have seen significant data center investment from companies drawn to the region’s relatively low-cost power and land. Alliant has been investing heavily in its grid infrastructure and renewable generation capacity.

The utility expects earnings growth at the high end of the 5%-7% range from 2027 to 2029. The company says it has three gigawatts of data center projects in the works that will boost power demand 50% by 2031, secured by long-term agreements with “high-quality customers.” Shares trade around 20 times earnings with a 2.9% dividend yield.

Entergy, as we’ve written, has secured bespoke large-load tariffs with big tech companies including Meta Platforms. That’s cleared a path for $27 billion in power investment, including more than 5.2 gigawatts of new generation.

The market knows this is one of the best-positioned utilities; shares are up more than 25% since January and trade at a 30% premium to the industry, at 24 times 2027 earnings. Any juice left in the stock would have to come from more power deals.

None of this spending will last forever, and a data-center backlash is gaining momentum. Maine lawmakers passed a bill last week to restrict construction, though the governor has yet to sign it. Campaigns to stop data centers are growing in Maryland, Virginia, and other locales.

Bulls acknowledge the pushback but say data centers will just move to greener pastures that have abundant natural gas, solar, and wind, and accommodative regulators.

If Yiu is right and AI is like the iPhone in 2011, it’s still early in the revolution.

OPIS Video: What’s next for oil?

The Strait of Hormuz remains blocked and the fuel crunch isn’t over. What’s ahead? I break it down with Denton Cinquegrana, chief oil analyst at OPIS, here.

Barron’s Energy Roundup

Oil’s Whiplash ↓ Brent crude futures rose more than 7% to nearly $97 per barrel in early Asian trading on Monday, erasing most of Friday’s declines as the U.S. and Iran exchanged attacks on ships over the weekend.

Oil prices had fallen by more than 9% on Friday on a previous agreement that the Strait would reopen, but Tehran reimposed controls and closed the chokepoint. Negotiations may continue in Pakistan, though both sides appear far apart, publicly, on peace terms.

Big energy names such as Cheniere, Venture Global, Marathon Petroleum, Valero, Exxon Mobil, and Chevron had fallen but are likely to rise again in premarket trading.

For now, the maritime passage—which facilitates roughly one-fifth of the planet’s fuel trade—remains offline. Without a de-escalation before the Tuesday cease-fire window expires, prices for crude oil and liquefied natural gas could climb higher as traders factor in a long-term disruption to global supplies.

Ships laden with LNG attempting to cross the Strait turned back over the weekend. A sizable chunk of Qatari LNG supply is damaged. The supply shock is likely to push some buyers to coal, domestic gas, solar, and other LNG substitutes.

European gas prices rose 10% at the open, though the region is less vulnerable to LNG spikes, having rebuilt supplies around U.S. and Norwegian production after losing most Russian imports in 2022.

The situation is tougher in Asia. LNG spot prices were up 63% since late February. That sent demand down, pushing Asian LNG arrivals to the lowest level since 2020, according to Bloomberg.

The re-escalation is likely to keep crude prices elevated, which is bad for refiners too. Negative Northwest European refining margins recorded by S&P Platts in April suggest refiners were no longer able to pass surging crude costs into product prices.

JPMorgan expects refinery cuts of roughly 2.9 million barrels a day for April and 6 million barrels in May, including cuts of 300,000 in Europe, 1.4 million in China, and 1.2 million across the rest of Asia.

Stocks impacted: Marathon Petroleum (MPC), Valero Energy (VLO), Cheniere Energy (LNG), Venture Global (VG), Exxon Mobil (XOM), Chevron (CVX)

Signs of life from Venezuela ↔ Venezuela is starting to look investible again, though still not easy.

Reforms passed after President Nicolás Maduro’s capture gave foreign companies more autonomy and scope to increase stakes. But investors are still waiting for final contract templates, tax terms, and clearer operating rules before committing large amounts of capital. The U.S. has also continued widening the financial plumbing needed to support commerce, including a new April 14 license allowing transactions with some Venezuelan banks.

Last week, Chevron signed agreements with Venezuelan national oil company PDVSA to deepen its focus on Venezuela’s heavy-oil belt. The agreement included raising Chevron’s stake in Petroindependencia—a Venezuelan joint venture with the company—to 49% while giving up offshore gas acreage including Loran.

Repsol also reached a preliminary agreement to gain operational control of a Venezuelan oil joint venture and is aiming to roughly triple output over three years.

These moves follow Shell’s announcement earlier this month that it expects to begin production in 2027 from Manatee, the Trinidad side of the giant Loran-Manatee gas field, while still working toward development of Loran on the Venezuelan side.

Chevron has the most obvious direct exposure because it produces about 260,000 barrels a day in Venezuela, roughly a quarter of the country’s output. The company is consolidating around its core heavy-oil assets. Shell gets optionality from a faster route to monetize offshore gas tied to Trinidad, though the valuation impact is probably limited until Loran is formally sanctioned. Repsol may have the most visible, relative upside if it can secure control and improve payment terms.

Stocks impacted: Chevron (CVX), Shell (SHEL), Repsol (REPYY)

The FERC Gets to Work ↑ U.S. regulators plan to act by June on rule-making over how large new electricity users such as AI data centers connect to the transmission system.

Utilities and regional grid operators have been handling data-center requests in an ad hoc way. Key questions remain unsettled, including who pays for transmission upgrades, whether existing customers are protected from those costs, and whether data centers and other large, new power consumers must bring their own generation.

The Energy Department pushed FERC last year to speed up and standardize large-load interconnections amid a flood of requests from utilities, Big Tech and other power-hungry customers. The White House also urged major tech companies to “build, bring, or buy” generation and pay for upgrades required to serve projects.

A cleaner FERC framework could help assign costs more clearly and put more of the burden on new loads driving the spending. Utilities want clarity. American Electric Power says it has 56 gigawatts of data-center load agreements and another 180 gigawatts of requests.

NiSource could also benefit. Last week, the utility announced a new Alphabet-backed data center customer in Indiana and said it would accelerate power delivery to Amazon sites. The utility is pitching its “GenCo” model—a mix of dedicated generation, storage, and market purchases for large-load customers—without shifting the burden to households. If FERC creates a cleaner process, that could make the model easier to scale.

Some utilities, meanwhile, are getting pushback on rate hikes. Exelon withdrew a proposed Pennsylvania rate increase after criticism from Democratic Gov. Josh Shapiro and other stakeholders over affordability. Mizuho subsequently downgraded the stock to a Neutral rating.