Being in the right place at the right time is old-school advice, but it's applicable in the world of investing. With the help of hindsight, it's now clear that investors benefited from embracing the artificial intelligence (AI) theme and AI stocks in 2022. And market participants who held energy stocks at the start of this year were handsomely rewarded.
Speaking of AI and energy, there's Bloom Energy (BE +9.18%), which epitomizes a right-place, right-time stock. A year-to-date gain of 143% confirms as much. In simple terms, this is a hydrogen stock, but that description arguably doesn't do Bloom Energy justice. Due to its ability to rapidly deploy clean on-site power, Bloom sits at the epicenter of addressing the crucial AI bottleneck posed by data centers' immense electricity demands.
Fresh thinking is needed to power data centers and Bloom Energy meets that demand. Image source: Getty Images.
The high-flying stock, which has surged 1,040% over the past three years, is responsive to data center buzz. Remember the deal announced earlier this month between CoreWeave and Meta Platforms? Bloom stock jumped 8.3% on that news.
Bloom can keep blooming, but there will be bumps
Now to the point: A $10,000 investment in Bloom today could potentially mint millionaires. Conventional wisdom says anything is possible, but it also says that getting there isn't going to be easy.
Breaking out the abacus, it's clear that for $10,000 to turn into $1 million, the investment must appreciate 100 times. Not 100%, but rather 100 times. Based on Bloom's market capitalization of $58.7 billion, a 100 times run would put it in the same market cap pantheon as Nvidia. That's asking a lot, and some analysts believe near-term downside is possible as Bloom could struggle to generate new catalysts to satisfy growth-hungry investors.
That's one of the rubs with growth stocks. Growth companies must constantly execute and provide catalysts to meet and beat investor expectations. Bloom has the potential to do so, but individual investors would do well to keep their expectations in check and not expect that $10,000 put into this stock today will rapidly turn into $1 million.
NYSE: BE
Key Data Points
That said, Bloom is an increasingly prominent player in the AI buildout theme. Data centers need to be in locations with ample power availability. Second, traditional utilities cannot scale rapidly enough to meet the demands of data center builders and hyperscalers. Bloom eases those burdens by bringing clean energy directly to the client at the data center site.
Bloom is pricey, but attractive
Trading at 118 times forward earnings, Bloom is far from a value stock, but its total current backlog of $20 billion and growing cash stockpile could buffer against valuation concerns. If 2026 earnings-per-share estimates of $1.33 to $1.48 on revenue of $3.1 billion to $3.3 billion prove beatable as the year advances, Bloom could further justify its lofty valuation.
Looking further out, domestic data center power demand is expected to quadruple by the end of this decade, and by 2030, a third of data centers are expected to be fully powered by onsite electricity. Those data points are in Bloom's wheelhouse, and that's potentially good news for investors. Just don't expect $10,000 to turn into $1 million overnight with this stock.
