Nvidia has become a darling in the investment community over the past few years. The semiconductor company has developed the chips driving the current boom in artificial intelligence (AI). That has driven the company's profits and stock price skyward.
However, Nvidia isn't the only beneficiary of the AI boom. Many companies that either are capitalizing on the megatrend or will do so are currently hovering under the radar of many investors.
Quanta Services (PWR -1.23%), Bloom Energy (BE -5.10%), and Brookfield Renewable (BEPC -1.73%) (BEP -1.60%) stand out to a few Fool.com contributors for their AI-powered upside. Here's why they think these companies will cash in on the AI boom.
AI is only one major catalyst
Tyler Crowe (Quanta Services): AI leaders haven't been shy about discussing one topic recently: AI's strain on infrastructure. AI's computing power and data storage requirements mean massive investments in new data centers, data transmission, and the physical infrastructure needed to make these things happen. Developing all of this infrastructure will probably be a major catalyst for Quanta Services, the nation's largest electrical construction contractor. When 40% to 45% of the cost of a data center is in the electrical systems, there will be lots of electrical work to be had in the coming years to build out AI capabilities.
Here's the thing: AI isn't the only catalyst for Quanta. Between AI, renewable energy, electric grid resiliency, nearshoring, carbon capture, green hydrogen, and the electrification of everything, capital spending on electrical work is going to be massive. Quanta estimates that global green energy capital spend will need to be somewhere around $3 trillion annually for the rest of the decade to remain on track to reach net zero emissions.
With that much money being spent on electrical work, it shouldn't be too surprising that Quanta has grown earnings per share 25% annually over the past decade.
The big winners in the AI race have yet to be determined, but anyone who wants to compete will need to spend billions in building out the infrastructure to make it possible. Quanta Services wins in this scenario, no matter who comes out on top.
The "Blooming" demand for clean power and AI
Jason Hall (Bloom Energy): Power demand is booming as more and more of the world electrifies. That's pushing demand for clean energy up, in particular as the leaders in spending for AI and other accelerated computing initiatives take steps to limit their environmental impact. Another factor that's massively important for AI, and data centers broadly, is making sure that they have uninterrupted access to power.
Bloom Energy is working to meet both of those goals. The company is in the hydrogen business, making equipment that turns hydrogen into electricity. This is a valuable process for data centers, because hydrogen is an excellent energy storage mechanism, making hydrogen fuel cells a great power backup as more and more data centers are being built in remote locations where infrastructure for other backup power generation tools isn't accessible.
That's only part of the appeal. Bloom is also a leader in manufacturing devices that can separate hydrogen from water using electricity, which means if you power them with wind or solar, you can produce green hydrogen. Since most of the world's hydrogen is produced by steam reforming of natural gas, this is a big environmental step forward.
Bloom is seeing strong interest from the tech world, too, recently announcing a partnership with Quanta Computer, and a deal with Intel to power Silicon Valley's largest fuel cell-powered high-performance computing data center.
Of course, there's risk with Bloom. It's a cyclical business, and industrial demand is a little soft at the moment. Bloom is spending a lot of money to scale up ahead of the rebound, so it's currently losing money. But with a strong balance sheet and a history of solid results, now could be the best time to invest in this risk/reward bet on clean power for AI.
Powering AI
Matt DiLallo (Brookfield Renewable): Data centers play a crucial role in supporting the growth of AI. They house the AI chips Nvidia and others develop to power AI applications. These facilities require a lot of energy, even more so to run AI applications. For example, AI-powered search uses up to 10 times more power than a typical search process.
Technology companies are proactively addressing their growing power needs by signing long-term power purchase agreements with renewable energy developers such as Brookfield Renewable. For example, the company recently signed an agreement with tech titan Microsoft to develop more than 10.5 gigawatts (GW) of renewable energy in the 2026-to-2030 timeframe. The massive deal is more than eight times larger than the biggest corporate power purchase agreement ever signed. It adds to the roughly 1 GW of renewable energy that Microsoft has already contracted from Brookfield.
That agreement puts Brookfield in a strong position to deliver more than 7 GW of new renewable energy capacity annually through the end of the decade. Those development projects, along with other organic growth drivers and acquisitions, should power 10%-plus annual growth in Brookfield's funds from operations (FFO) per share through at least 2028. That should give Brookfield Renewable the power to grow its high-yielding dividend, which recently sat at around 4.5%, by 5% to 9% annually over the long term.
Brookfield's AI-powered growth accelerator puts it in a strong position to generate double-digit annualized total returns in the next several years. That high probability of earning high returns makes it a great way to cash in on the AI boom.
