Chris’ note: The rise of artificial intelligence (“AI”) is one of the biggest trends on our radar. As I’ve been showing you, it will revolutionize trillion-dollar industries – from insurance, to medicine, to defense.
But running an AI system requires a lot of electricity. That electricity has to flow from a power plant to a data center somewhere. And that’s a problem…
As friend of Legacy Research and income investing expert Brad Thomas reveals below, data centers in the U.S. can’t get enough power. And he’s found a way to generate reliable streams of income from the companies solving data centers’ power problem.
You live in Virginia…
In the northern part of the state…
Loudoun County, most likely…
I don’t mean physically. But your online identity… your social media posts… your photos… that song you’re streaming right now.
There’s a good chance that a chunk of data is stored and served to you from a data center in Northern Virginia.
It has the highest concentration of data centers in the world. Between 30% and 70% of internet traffic flows through data centers there.
Most of them are in Loudoun County.
Companies love building data centers in Virginia. The state has blazing-fast internet connections, few regulations, and generous tax benefits. It also has mild weather and few natural disasters.
Most important, it has cheap and abundant power.
Or rather it had cheap and abundant power.
Data centers in Northern Virginia have a problem. They can’t access enough electricity.
My mission is to help folks find the safest income investments on the market. When major trends are happening in an industry, I pay attention.
And I’ve found a way to collect a safe, reliable income via the companies solving data centers’ power problem.
Aging Grid
Virginia isn’t the only state without enough power.
Data centers across the country are in the same situation.
It’s down to one word – transmission.
Electricity that’s generated at a power plant must flow through a network of transmission lines before reaching homes and businesses.
But each power line can handle only so much power. If it gets overloaded, it can create enough heat to melt the wires.
That’s the problem data centers are running into. Power plants are generating enough power. But there aren’t enough transmission lines to safely deliver it to where it needs to go.
Work started on America’s electricity grid more than a century ago. And the bulk of the grid we use today was built between the 1950s and 1970s. It wasn’t built to handle the large amounts of electricity use today.
And the problem is going to grow, as companies start using artificial intelligence (“AI”).
AI Is a Data Hog
Every operation a computer performs corresponds to electrical signals that travel through its hardware. This consumes power.
On top of that, microchips, hard drives, and servers heat up when they’re running. That means they need to be cooled.
And because it’s crunches so much data, AI uses more energy than other forms of computing.
That’s why an answer from AI chatbot ChatGPT requires anywhere from 3 to 30 times more energy than a Google search.
According to a research paper published in 2021, training Chat GPT required 1,287 gigawatt hours of power. That’s about as much as 120 U.S. homes consume in a year.
So, it’s no wonder data center construction is still booming. AI will require a whole lot more data center capacity.
The government is aware of the transmission bottleneck. The Department of Energy has $13 billion in grants and funding from the infrastructure bill to modernize and build out our aging grid.
That money will flow to one sector…
Golden Opportunity
This is a golden opportunity for utility companies to build more transmission lines.
Most utility companies’ earnings are regulated based on the infrastructure assets they own, not the amount of electricity they deliver. So, building large power transmission projects will boost their earnings for years to come.
An easy “one-click” way to add utility companies to your portfolio is the Utilities Select Sector SPDR Fund ETF (XLU).
This exchange traded fund (“ETF”) holds a basket of the largest utility companies in the U.S. The same companies that will be called get enough power to the country’s growing number of data centers.
And right now, XLU yields 3.1%.
You can also profit from this current trend with one of my favorite plays right now.
I call it Amazon’s secret royalty program. It allows you set up royalty-like income streams from the growing demand for data centers – like the ones in Northern Virginia.
To find out more, head over here.
This growing demand for new transmission infrastructure isn’t going away.
So, you can profit from this trend for years to come.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily