When it comes to artificial intelligence stocks, a lot of the early investment attention has been focused on semiconductor chip designer Nvidia (NVDA 1.56%), and its stock price has spiked as a result. But lately, its price has become somewhat volatile. There's nothing inherently wrong with Nvidia, which designs many of the best chips used to power artificial intelligence (AI). It isn't shocking for a hot investment theme like AI to be expensive and volatile. But some investors care about valuation or prefer stocks that aren't so volatile.
If you are one of these more conservative investors, you don't have to invest in AI the way everyone else seems to be doing it. You can buy picks-and-shovels plays that will benefit alongside AI companies as the technology grows. Here are three stocks you might not have known were AI plays.
The problem with AI
Artificial intelligence is impressive but still imperfect. It can make up answers to questions without any connection to reality. It can have trouble properly rendering things such as hands in pictures. And there appear to be few guardrails around how it gets used. These are all issues that have to be addressed, but they aren't the big problem that AI faces.
Image source: Getty Images.
The big problem is energy. The calculations that make AI possible consume a huge amount of electricity, and the power draw is only going higher from here. Even if more energy-efficient AI is created, it probably won't solve the problem, as demand for AI is increasing at a rapid clip. For example, electricity demand from data centers, where AI effectively lives, is expected to increase by 300% over the next decade.
That's a lot of demand growth in a very short period of time. And it is going to provide a powerful tailwind to companies that provide power. Bloom Energy (BE 1.67%), Dominion Energy (D +0.57%), and Brookfield Renewable (BEP 2.11%)(BEPC 3.37%) are particularly well-positioned to benefit. Let's take a closer look at these three unconventional AI plays.
1. Bloom Energy provides power quickly
One of the issues facing AI and data centers is the sometimes glacial pace at which utilities can provide connections to the grid. It takes time to build the needed infrastructure, specifically power lines. And it takes time to build the additional capacity, specifically building new power plants. Bloom Energy is well-positioned to bridge the time gap.
NYSE: BE
Key Data Points
Bloom Energy makes what it describes as a "solid oxide platform for distributed generation of electricity." Essentially, it builds hydrogen fuel cells in a factory, enabling them to be delivered quickly and easily wherever they are needed. The big story here is the $2.5 billion product backlog and $9 billion service backlog (fuel cell sales generally lead to service contracts, too) that the company had at the end of 2024. Basically, Bloom Energy already has significant demand to serve and will likely see more demand as AI companies look for stopgap measures that allow them to get up and running quickly.
2. Dominion Energy is in the right place
Dominion Energy is a boring old regulated utility that is currently offering a generous 5% dividend yield. Being regulated means it must get its rates and investment plans approved by the government. But in exchange for that regulation, Dominion is granted a monopoly in the regions it serves. This is the interesting part with regard to AI.
NYSE: D
Key Data Points
Dominion's territory includes key parts of Virginia, which happens to be one of the most important data center markets in the world. In less than six months, requests for data center hookups increased 88%! This is just one region that Dominion serves, of course, but this demand is highly likely to translate into regulator approval for rate hikes and capital investment plans. And that, in turn, should lead to earnings growth, which management currently believes will hover between 5% and 7% a year for the foreseeable future.
3. Brookfield Renewable is the clean choice
While power is important for AI, there's another trend taking shape in the energy space. That's the increasing demand for cleaner energy, which Brookfield Renewable is squarely focused on meeting. It owns a globally diversified portfolio of hydroelectric, solar, wind, and battery power sources and is starting to invest in the nuclear power space. If an AI company is looking to gain access to clean power, Brookfield Renewable is probably on the short list of providers.
NYSE: BEP
Key Data Points
Notably, Brookfield Renewable already has a multi-year, 10.5-gigawatt deal with Microsoft to help this technology giant build out its AI data centers. And it is in talks with other companies about similar deals. So, there's a runway for growth ahead for the company in both clean power and AI. You can benefit right along with Brookfield Renewable and collect a yield of up to 6.6% along the way.
You don't have to buy AI stocks to invest in AI
Bloom Energy, Dominion, and Brookfield Renewable are three interesting examples of ways to invest in AI without actually buying AI stocks. They aren't the only options, of course. However, if you are interested in AI but can't stomach the volatility or valuations in the niche, you might find each of these companies an attractive alternative.
