The theme of artificial intelligence (AI) will continue to captivate investors. Without electricity, however, the lights could easily turn off on that investing idea. With the growth of AI, the energy demands on the power grid will be substantial, creating opportunities in ETFs like the AL+PS Electrification Infrastructure ETF+ (ELFY ).
The tidal wave of AI continues to grow as big tech names like Amazon, Google, and Meta continue to make their AI platforms even more robust. Furthermore, the increasing adoption by AI from a consumer and business user perspective only compounds the need for energy.
Power-Hungry Data Centers
Data centers that help run these AI applications require copious amounts of energy, electricity in particular, to run. As such, the demands on the power grid will be substantial. They will require expanded electrical infrastructure in order to meet the energy requirements of today and tomorrow.
“In 2024, data centers consumed an estimated 180 TWh of load across the US, and industry forecasts range between 236 TWh and 606 TWh by 2030,” Aurora Energy Research indicated for an upcoming webinar that addresses this issue. “As the range of AI use cases grows, a myriad range of factors will influence the load required to meet this demand, including efficiency gains, speed of adoption and integration, and AI monetization.”
Investing in the power grid will also require government subsidies to support the buildout of infrastructure. The U.S. Department of Energy via the Grid Deployment Office (GDO) plans to invest $14.5 billion in competitive funding to help advance the power grid.
That same investment is being carried out on a global scale as shown in an energy outlook report from Bloomberg. As shown below, the GDO will allocate considerable investment towards the transition to alternative energy sources with power grids receiving attention.
Diversified Growth Potential
With a balanced approach in mind, ELFY seeks to provide exposure to mid- and large-capitalization companies, all totaling $5 billion in market capitalization. The companies included in its holdings are well-positioned to attain the growth potential in the ever-growing global electrification trend. As such, companies in the fund include ancillary electrical services. These include charging, equipping, supplying or operating with electricity, or the conversion of a machine or system into electrical power.
The fund’s largest holding, as of July 24, is GE Verona (GEV), which has a weighting of 1.37%. The rest of the fund is spread almost evenly across the rest of its 86 holdings. This essentially avoids overconcentration in one or a few names, allowing for better volatility mitigation.
Incepted only in April, ELFY is off to a strong start. The fund is already up 29% for the year, underscoring investor interest in the global energy transition. Electricity will certainly be paramount in that transition, creating aforementioned opportunities to build out electrical infrastructure. ELFY is poised to capture that growth.
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