Nvidia (NVDA 0.58%) reported yet another quarter of strong growth with its fiscal first quarter 2026 earnings. Revenue rose a massive 69% year over year and was up 12% sequentially. Demand from data centers was the big driver of performance, with revenue from this customer group up 73% year over year.
That level of growth is the big reason these three stocks will be great buy-and-hold investments if you want to tap into AI growth.
The problem with Nvidia stock
Nvidia is performing exceptionally well as a business. But this isn't a secret, and the stock price is up over 1,400% over the past five years. Although the stock's price-to-sales and price-to-earnings ratios are reasonable when compared to their five-year averages, it would be hard to suggest that Nvidia is a cheap stock. Indeed, the P/E ratio is a lofty 45x. A lot of good news is already priced in here.
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The glass-half-full argument is that Nvidia has a lot of good news to offer, and there's no sign that the good news is going to stop flowing. But artificial intelligence (AI) is still a very young industry. At one point, Yahoo! looked like a category killer in search, but it was still surpassed by Alphabet's Google service. It is still early days in AI, and it remains difficult to predict which companies, from Nvidia to Palantir Technologies, will be the long-term winners.
But there's one thing that is very clear: AI and the data centers in which it lives are going to increase demand for electricity by a massive amount. By the National Electrical Manufacturers Association's estimate, the increase in electricity demand will be around 300% over just the next decade. And that will lead to a step change in the demand for electricity. Demand rose by a grand total of 9% between 2000 and 2020 but is expected to increase by 55% between 2020 and 2040.
Electricity is the closest thing to a sure thing as you can get in AI
AI is great, but it stops working if you turn off the power switch. And it draws a massive amount of power from the electrical grid. AI growth is going to be good for electricity providers across the board. The safest play is probably a utility like NextEra Energy (NEE -0.22%). This company is really two businesses in one.
NextEra owns one of the largest regulated utilities in the United States, giving it a solid business foundation. But on top of that, it has built one of the world's largest clean energy businesses. That has helped NextEra grow very rapidly, and the company has increased its dividend at a compound annual rate of 10% over the past decade. That is huge dividend growth for any company, let alone a utility. Add in an attractive 3.1% dividend yield and growth and income investors, as well as AI aficionados, will want to get to know NextEra Energy.
For income-focused investors, however, Brookfield Renewable Partners (BEP -0.85%) will probably be the better choice. It has a huge 5.7% yield and a history of regular distribution growth, though at a slower rate than that of NextEra Energy. The big story here, however, is the fact that data centers are increasingly trying to find ways to use clean power for their properties.
The headline for Brookfield Renewable on that front is that it has inked a deal with Microsoft to provide 10.5 gigawatts of power to the tech giant. The specific purpose of the agreement is to power Microsoft's data centers. Brookfield Renewable is not a regulated utility, so it can sell power to any company anywhere in the world, given its diversified portfolio of renewable energy assets. It is holding talks with other tech companies that could result in deals similar to what it inked with Microsoft.
For investors who are willing to invest in AI stocks, however, income-focused and risk-averse investments like NextEra and Brookfield Renewable may not be what you're after. If you prefer to lean into the "next big thing," consider NuScale Power (SMR 2.37%), which is working to build small modular reactors (SMRs). SMRs are basically a scaled-down version of a nuclear power plant that is built in a factory and can be placed right next to where power is needed, like for an AI data center.
Right now, NuScale Power has partial agreements with several potential customers and is working to nail down its first customer. Once it has that deal, however, it is highly likely that additional customers will follow. And that could turn this money-losing upstart into a reliably profitable nuclear power stock. AI and data centers could be a very important end market.
Think outside the AI box and go with a pick-and-shovel play
You can certainly attempt to pick the next big AI stock. And maybe you'll hit the jackpot. But Wall Street is littered with once-hot companies that didn't make it. The one thing that is very clear about AI, however, is that it needs power to "live." And if you can switch gears just a little as an investor, there are plenty of ways to play AI with a pick-and-shovel approach.
NextEra is a conservative and dividend-growth-focused option. Brookfield Renewable is a high-yield choice. And NuScale Power is a leading-edge nuclear power investment that will probably excite more aggressive investors. With AI businesses set to grow their electricity demand for at least a decade to come, each of these power-related investments has the AI wind at its back.
