Peter Thiel has been a tech guru for decades. He co-founded major companies such as PayPal and Palantir and made significant early investments in Meta Platforms and Space Exploration Technologies, among others.
Thiel also runs a hedge fund, Thiel Macro, which hasn't been very active in recent quarters. But in the second quarter, Thiel's fund resumed buying, investing more than $418 million in eight new stocks. They all have a common theme.
Image source: Getty Images.
Powering artificial intelligence
Here are the eight companies Thiel Macro invested in during the second quarter and how much of the portfolio each position consumed:
- Amazon: 28% of the fund and a position of nearly $118 million
- Vista Energy: 18% of the fund and a nearly $76 million position
- Vistra: 14% of the fund and a nearly $59.1 million position
- American Electric Power (AEP -0.53%): 10% of the fund and a roughly $42.2 million position
- DTE Energy: 9.6% of the fund and a nearly $40.3 million position
- FirstEnergy: 9.5% of the fund and a nearly $40 million position
- CMS Energy: 9.4% of the fund and a nearly $39.6 million position
- X-Energy: 0.9% of the fund and a nearly $3.7 million position
Just by looking at the names, it's pretty clear that the theme is power. If you dig a little further, it's even clearer that Thiel's bet on power has to do with the artificial intelligence (AI) revolution.
Amazon is building data centers for its cloud division, Amazon Web Services, which helps power frontier AI models such as those at Anthropic and OpenAI. The company has committed $220 billion in capital expenditures this year, most of which is for AI infrastructure.
Vista Energy is a large oil and gas company in Latin America, focused on shale in Argentina. Vistra is a U.S. electricity company that provides power to customers, businesses, and communities.
American Electric Power is one of the largest electric companies in the U.S., with a transmission network spanning 40,000 miles.
NASDAQ: AEP
Key Data Points
DTE Energy serves 2.3 million customers in Southeast Michigan but also has a natural gas unit and a portfolio of non-utility power businesses, including industrial energy services, renewable natural gas, and energy marketing and trading.
FirstEnergy is an electric utility serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, and Maryland. CMS Energy is Michigan's largest electric and natural gas utility, serving 6.8 million customers. CMS also owns an independent power generation subsidiary that does business in several states.
X-Energy is building small modular nuclear reactors to produce clean, sustainable energy.
The Thiel trade
Thiel's trade is that power demand, which has been little changed during the past two decades, will enable these companies to deploy capital at regulated returns to modernize the grid and, in some cases, expand capacity, in part to meet growing demand from data centers that are fueling AI.
American Electric Power, DTE, CMS, and FirstEnergy are regulated utilities, so they have a monopoly in their markets. Their returns are capped by regulators but essentially guaranteed.
In May, American Electric Power said it had increased its five-year capital spending by $6 billion to $78 billion. In July, the company announced that it has a line of sight to an additional $10 billion in capital investments beyond its initial five-year plan.
Furthermore, the company's load is expected to grow to 69 gigawatts (GW) by 2030, up from a plan of 63 GW in May, fueled by agreements with hyperscalers and data center developers.
On the other hand, a company like Vistra is an independent power producer and not under regulatory jurisdiction. Rather, it sells electricity wholesale to markets in response to demand.
Thiel's likely thesis is not exactly a new take, as many experts have noted that the world will need more power to fuel AI.
The risk, of course, is that AI hits a snag or that there is a huge overbuild of AI infrastructure. However, power demand is also expected to rise due to other factors, such as a warmer climate, which has significantly increased the use of air conditioning, and the electrification of heat and certain forms of transportation.
Ultimately, if you believe AI is here to stay, the world will need more power to fuel it.
