Hyperscalers’ AI buildout will require massive amounts of energy. Two under-the-radar stocks will benefit
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POWER POINT
What I heard from people in energy
There is an extreme focus on hyperscaler hypergrowth.
I tried to summarize investor thinking in a single sentence. The pace of spending on AI is so insane it makes the Energizer Bunny look lazy. This growth is coming from “hyperscalers,” which is just a fancy term for big tech companies that are rapidly increasing their bets on artificial intelligence.
This weekly intelligence piece on energy is about AI because—in this writer’s rather modest opinion—there is no AI story without energy. AI requires a huge amount of computing power (“computing”), and computing requires a huge amount of electricity. In other words – and say this with me – Artificial intelligence is power. Really.
As long as the AI spending story continues, it stands to reason that investment in energy will evaporate with it. Now that we’re out of another earnings cycle, three things are clear:
1. Energy gains remain extremely strong
2. AI-related capital expenditures are a big part of the story
3. See items 1 and 2
As the BNP Paribas team noted:
“AI Hyperscalers capex continues to be revised higher. Following issuers’ guidance from Q1 earnings season, estimates for 2026 capex are now $725 billion, nearly doubling since mid-2025. Capex is growing faster than OCF [operating cash flow]increases financing needs. “
It’s hard to understand the numbers. BNP Paribas highlights that consensus estimates for capital spending were ‘only’ $365 billion a year ago, meaning this year’s $725 billion capital spending forecast is almost double last year’s estimate.
When was the last time you saw a major forecast nearly double in one year?
Let’s put the $725 billion increase in AI-related spending into perspective.
$725 billion is more than the total GDP of some mid-sized European countries and about 1.5 times the size of Singapore’s economy.
At $725 billion, it’s roughly the same size as JPMorgan Chase’s market cap. That’s only $125 billion less than ExxonMobil’s total value and twice the value of Chevron.
$725 billion is more than 3x the combined value of every NFL team (check out CNBC’s exclusive NFL valuation analysis) Here).
You may also see other numbers. Each company has its own estimates. But they are all quite optimistic. For example, UBS sees almost half a trillion spent, and that’s just on the power side. They write:
“Overall, we see $511 billion spent on production capacity additions by 2030, a 3% increase [compounded annual growth rate]“Does not include transmission or distribution structure.”
UBS believes both natural gas and solar will continue to see “depleting order books” if such spending continues.
Evercore ISI is even more optimistic, forecasting spending of around $800 billion, with much of that spending coming from abroad. Alphabet (GOOGL)Microsoft (MSFT), Meta (META), Amazon (AMZN) and Oracle (ORCL).
$700 billion, $800 billion etc. No matter how big the final numbers are, they are huge.
Bottom line: You rarely realize you’re making history while you’re alive. This, my friends, is history. We do this in real time.
It reminds me of when I was starting out and the internet was just getting big. Companies will come and companies will go, but this investment cycle is real and amazing. But remember, like most Wall Street history, there will be winners and losers. Some stocks are big winners and some stocks are underdogs.
Focus. Keep watching and reading CNBC. And enjoy the ride.
TAKE ACTION → So how can you invest in and around this massive AI capex cycle?
One way, of course, is to invest in hyperscalers. Super mega headline names you may have already invested in.
Another is to look at the companies powering all these AI dreams. One of them is Hut 8 (HUT). The Miami-based energy infrastructure company continues to make tons of money for investors. Last week, Hut 8 signed a $9.8 billion deal and shares soared. We interviewed CEO Asher Genoot about the massive deal, and you can watch it here.
Analysts covering Hut 8 have a $118.13 target on the stock.
Another example is the smaller-cap Fluence Energy (FLNC). The energy storage and battery company posted a narrower loss and signed supply deals with two major hyperscalers. This news caused shorts to close and shares to rise. Shares doubled in a week
But investors note: the stock price is currently above Wall Street analysts’ current 12-month price target.
UBS likes companies that benefit in other ways from all this spending. Analysts believe Eaton (ETN) and Brazil-based WEG (WEGE-BR) face ‘tailwinds’ from expected power generation additions. He also believes companies interested in power-saving solutions, such as Johnson Controls (JCI) and Trane Technologies (TT), should also benefit.
It’s not just stocks. BNP Paribas has some interesting ways to play the debt and credit markets. They believe some of the investment-grade debt market in Taiwan should benefit from this.
The Paris-based company says: “The AI cycle poses an economic headwind for Taiwan, with GDP growth reaching +14%. We believe that increased incomes were partly directed to life insurance policies, which ultimately increased foreign demand for long-term $IG credit.“
More specifically, there are three trading ideas for clients that suggest overweights in dollar-denominated high-yield AI infrastructure debt, investment-grade banks, and investment-grade telecommunications companies.
Now let’s move on to oil. Given all of the above, and at least at the time of this writing, there is no meaningful peace agreement signed with Iran and Trump saying the ceasefire is “on life support,” it’s important to listen to what Wall Street is saying about prices.
JPMorgan commodity analyst Natasha Kaneva points out the recent big change in oil stocks. Kaneva points out how oil storage increased during Covid lockdowns, reversed when Russia invaded Ukraine, and then reversed again in 2024 and 2025. This isn’t a history lesson, but an explanation of why oil rose but not rapidly: Crude oil stocks were high during the Iran war. This surplus created a major buffer against the more than 1 billion barrels of oil estimated to have been ‘lost’ since the start of the Iran war.
Kaneva and his team expect the Bosphorus to reopen “one way or another” in June. But be careful. All these stocks were emptied every day, writes Kaneva. If the strait remains risky and difficult to pass for many crude oil tankers, these stores will continue to decrease, reaching what it calls “operational stress levels” in early June. Hello, are the prices higher?
You have been warned!
Take a look → Watch my interview with Jefferies analyst Julien Dumoulin-Smith about what the rest of Wall Street has wrong with Fluence Energy.
DOMESTIC
This week’s Inside Line is with Francisco Leon, CEO of California Resources, a California-based oil and gas drilling company growing in the carbon capture space.
RANDOM BUT INTERESTING
Overall, US energy production continues to increase. Natural gas and crude oil lead the way; Nuclear, solar and wind are also becoming stronger. Coal continues the downward trend that began nearly two decades ago.
GRILL
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