AI has the potential to be the most impactful technology ever developed. However, it can only reach its vast potential if the world builds out the physical infrastructure needed to support its adoption. Total spending on AI-related infrastructure could reach $7 trillion over the next decade.
Two of the most significant needs are the development of more data centers and power generation capacity to support AI's adoption. That plays right into the strategies of Brookfield Renewable (BEPC 1.29%)(BEP 0.90%) and Brookfield Infrastructure (BIPC 1.32%)(BIP 2.62%). It's the driving factor behind my decision to recently buy even more shares of these two underappreciated AI stocks.
Image source: Getty Images.
Powerful total return potential
Brookfield Renewable is a global leader in clean power. It operates hydro, wind, solar, and battery storage assets. Additionally, it has a growing sustainable solutions portfolio, including nuclear services (Westinghouse).
The company's large-scale and development expertise has made it a key power partner of leading AI companies. Brookfield Renewable is building 10.5 gigawatts of renewable power for Microsoft through 2030 to support its cloud computing and AI operations. It's the largest-ever corporate power purchase agreement (nearly eight times the prior record). Brookfield also signed the largest-ever hydropower supply deal with Google (up to 3 GW). Meanwhile, Westinghouse, which it co-owns with leading uranium producer Cameco, is building at least $80 billion in new nuclear reactors under a strategic partnership with the U.S. Government to support the development of AI.
NYSE: BEPC
Key Data Points
Brookfield's robust growth drivers support its expectation of delivering more than 10% annual growth in its funds from operations (FFO) per share through 2031. Analysts expect the company will approach nearly 20% annual FFO per share growth over the next three years. That should give it ample power to continue increasing its 3.6%-yielding dividend. Brookfield's combination of income and growth could enable the leading renewable energy dividend stock to generate robust total returns.
Multiple AI-fueled growth drivers
Brookfield Infrastructure is the infrastructure-focused sibling of Brookfield Renewable. The company invests in utilities, energy midstream, transportation, and data infrastructure assets.
NYSE: BIPC
Key Data Points
The global infrastructure operator is investing across the AI infrastructure value chain. For example, it partnered with Intel to help the semiconductor giant fund the construction of two U.S. semiconductor foundries. Brookfield also has a global data center platform that's building new facilities to support the needs of large technology companies and other customers. It's also investing capital to deploy Bloom Energy's advanced fuel cell technology to help power large-scale data centers. Meanwhile, it recently acquired a South Korean industrial gas business, the leading supplier of industrial gases to semiconductor manufacturers in that country. Additionally, Brookfield's utility and energy midstream businesses should benefit from rising demand for electricity and natural gas.
Brookfield Infrastructure's multiple growth drivers support its expectation of delivering FFO per share growth of more than 10% annually. The company believes that fading headwinds from interest rates and foreign exchange fluctuations, along with the completion of several strategic enhancements, could drive FFO per share growth closer to 14% in the coming years. That should enable the company to continue increasing its 3.7%-yielding dividend and support robust total returns.
Building the backbone infrastructure to support AI
Much of the discussion around AI centers on which LLM developer or semiconductor stock will lead the way. That's causing many investors to miss the generational opportunity to invest in the backbone infrastructure needed to support AI's adoption. Brookfield Infrastructure and Brookfield Renewable are leaders in building the infrastructure AI needs to thrive. That's why I continue to load up on shares of these underappreciated AI plays. I believe that they can generate robust returns in the coming years as their AI investments pay off.
