Artificial intelligence (AI) is a revolutionary technology. And according to an estimate by PwC, it could contribute a staggering $15.7 trillion to the global economy in 2030. That's more than the current combined economic output of China and India.
The AI revolution requires four factors to thrive: Renewable power, data centers, semiconductors, and computing capacity. That aligns perfectly with the strategies of siblings Brookfield Renewable(NYSE: BEPC)(NYSE: BEP) and Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP). It makes them great growth stocks to buy for those seeking to capitalize on the unprecedented AI investment opportunity.
A staggering power vacuum
Brookfield Corporation, the parent company of Brookfield Renewable and Brookfield Infrastructure, has aligned its investment focus around several key megatrends. CEO Bruce Flatt wrote about the opportunity in electricity in his second-quarter letter to investors:
The next 20 years will be an unprecedented period for electricity build-out. The electrification of industrial capacity, automobiles, heating for houses, and other uses is driving unprecedented growth in the demand for electricity. On top of that, the world is adding data centers for AI and cloud computing at a stunning pace.
Flatt noted that the world will need an estimated 20,000 gigawatts (GW) of power generation capacity within the next two decades to meet the world's surging electricity needs. He then put that into perspective: there's currently about 8,000 GW of power generation capacity worldwide, nearly half of which is very carbon intensive (e.g., coal-fired) and will need to be retired in the future. "Said differently," Flatt wrote, "we need to more than double the current capacity (which was largely built over the past 50 years) while also replacing approximately 50% of what we have."
That's a daunting task. However, Brookfield Renewable is up for that challenge. It's one of the world's largest builders of renewable energy projects. It has over 230 GW of projects owned or in various stages of development. It's working directly with leading technology companies to meet the surging power needs of their AI and cloud businesses. For example, it recently partnered with Microsoft to deliver 10.5 GW of power in the coming years. That's eight times larger than the biggest corporate power purchase agreement ever signed. However, it's a tiny fraction of the 16,000 GW needed to meet future demand.
Capitalizing on vast opportunities
Brookfield Infrastructure is working to capitalize on the other side of the AI demand drivers. In a few short years, it has become one of the largest data center builders in the world. It has acquired several data center platforms to increase its scale and expand its capacity.
The company currently has over 135 data centers with about 750 megawatts (MW) of critical load capacity. Its global platform has the potential to develop 2.5 GW of capacity in the coming years. That includes 1.4 GW that's either already operating or under contract for development. This robust development pipeline drives Brookfield's view that it can grow the earnings of its data center platform by 2.5 times over the next three years alone.
Brookfield Infrastructure is also investing in the construction of two semiconductor manufacturing facilities in Arizona with Intel. The $30 billion complex will supply the U.S. with chips needed to run data centers for AI and cloud computing applications.
These investments are likely only the beginning. Bruce Flatt wrote: "The computing capacity required for algorithms to advance medical discovery and industrial productivity is large. The amount needed to power computing capacity to train robotics toward intelligence nearer to humans is vast." That suggests the world will need more data centers and more high-powered chips to run these applications, which should provide many new investment opportunities for Brookfield Infrastructure in the coming decades.
Supercharged growth prospects
Brookfield Renewable and Brookfield Infrastructure each expect to grow their cash flow per share at a more than 10% annual rate for the next several years. That should give them the power to increase their high-yielding dividends (currently over 4% apiece) by 5% to 9% annually. Add their growing dividend income to their rapidly rising earnings, and both companies could easily produce total annualized returns in the mid-teens. That makes them great ways to cash in on the unprecedented AI-driven growth potential of renewable power and computing capacity.
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Matt DiLallo has positions in Brookfield Corporation, Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Brookfield Renewable, Brookfield Renewable Partners, and Intel and has the following options: long January 2025 $30 calls on Intel, short January 2025 $30 puts on Intel, short November 2024 $45 calls on Intel, and short October 2024 $45 calls on Intel. The Motley Fool has positions in and recommends Brookfield, Brookfield Corporation, Brookfield Renewable, and Microsoft. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable Partners, and Intel and recommends the following options: long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
