The AI trade is broadening into the energy sector
Latest Goldman Sachs reports shows AI growing into other sectors of the market.
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The AI trade is broadening into the energy sector
In first-quarter earnings calls, 41% of S&P 500 companies that had reported through May 15th mentioned AI, according to Goldman Sachs Research. That compares with 23% of companies mentioning AI in the first quarter a year ago.
Many of these mentions emerged in the tech sector, of course; around 87% of tech companies referred to AI in their calls. But the AI trade “has begun to broaden…particularly to companies that the market expects will be needed to enable the use of AI technology such as data centers and utilities companies,” David Kostin, Goldman Sachs' chief US equity strategist, writes in his team's report.
One sign of this broadening lies in the statistic that nearly 70% of S&P 500 energy companies mentioned AI on their earnings calls, up from 19% in the fourth quarter of 2023. Since the start of March, a basket composed of energy producers that benefit from rising power demand has outperformed a basket of companies pursuing or enabling AI technology. Goldman Sachs Research expects US power demand growth to accelerate to an annual average of 2.4% until 2030, from 0% the previous decade, driven in part by the needs of AI.
On average, a ChatGPT query needs nearly 10 times as much electricity to process as a Google search. In that difference lies a coming sea change in how the US, Europe, and the world at large will consume power — and how much that will cost.
For years, data centers displayed a remarkably stable appetite for power, even as their workloads mounted. Now, as the pace of efficiency gains in electricity use slows and the AI revolution gathers steam, Goldman Sachs Research estimates that data center power demand will grow 160% by 2030.
At present, data centers worldwide consume 1-2% of overall power, but this percentage will likely rise to 3-4% by the end of the decade. In the US and Europe, this increased demand will help drive the kind of electricity growth that hasn’t been seen in a generation. Along the way, the carbon dioxide emissions of data centers may more than double between 2022 and 2030.
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