Nvidia Artificial intelligence (AI) has been one of the main beneficiaries of the megatrend. Its chips are in high demand, which one Strong revenue and earnings growth for a semiconductor company has made Nvidia one of the most valuable companies in the world.
however, Nvidia The AI boom isn't the only company benefiting. AI Training Models and Applications That race Its chips reside in data centers. Those facilities are power-hungry buildings, especially when they support AI.
This may lead to an increase in power demand in the coming years. This should be beneficial. Energy reservesThis includes the underappreciated natural gas sector. are here Few Ways to Play the Potential AI-Fueled Boom in Natural Gas Demand
Promoting clean energy transition
The demand for natural gas has increased steadily over the years. Several catalysts have fueled this growth, including replacing coal Cleaner burner Fuel and growing LNG Demand for export gas may accelerate in the future, driven in part by AI data centers:
As this slide shows, data centers alone could drive an additional 10 billion to 18 billion cubic feet per day (bcf/d) of demand by 2030. Possibly Over the last decade, this sector has grown significantly.
Many companies in the natural gas industry should benefit from increased gas demand. A potential beneficiary is the country's leading gas producer, EQT (NYSE: EQT ). The company controls 1.1 million net acres in the gas-rich Appalachian region (Pennsylvania, Ohio, and West Virginia). This massive position in one of the world's best gas-producing regions enables it to produce gas. A very low one Cost (equivalent to $1.36 per million cubic feet).
EQT is also ideally located to supply gas to power data centers. The company has access to (or will soon own) the pipeline. Aquitrans midstream from acquisitions, or contracts with third-party pipeline operators) to multiple data center clusters:
EQT should generate significant free cash flow in the coming years, driven by increased gas demand and other catalysts such as its pending Equitrans deal and contracts to supply new LNG export facilities. The company estimates it could generate a total of $7.5 billion to more than $25 billion in free cash flow over the 2025 to 2029 period, assuming gas averages between $2.75 and $5 per MMBtu.
If the AI lives up to its potential, its high end is high. This strong cash flow will provide it with funds to pay down debt, pay dividends and buy back shares, which could provide fuel. A strong tomorrow return for investors.
Delivery of gas to demand centers
Natural gas Pipeline companies AI is another potential big beneficiary of increased electricity demand by data centers. This catalyst will increase transportation volumes on existing pipelines while providing them with new expansion opportunities.
is one of many potential beneficiaries. Williams (NYSE: WMB ). The company operates the Transco Pipeline, which runs along the East Coast, serving high-demand areas such as Atlanta, Charlotte, North Carolina, and the Capital Region. Those areas are also hotbeds for data centers, which tend to be near major cities.
In particular, Transco could be key to supplying gas to data centers in Virginia. Regional utility Dominion Energy Electricity demand from facilities in its service area is expected to grow two and a half times over the next decade.
Williams Currently Seven projects are underway to expand Transco (and three more of its other major natural gas transmission pipelines). It has another 30 gas transmission pipeline projects under development. On top of that, the company has other gas infrastructure projects underway to expand its position in the Gulf of Mexico, the western US, and the Northeast (where EQT operates).
These projects give Williams a lot of visibility. The pipeline giant expects its earnings to grow 5% to 7% annually over the long term. That should give it fuel to increase its high-yielding dividend (recently around 4.5%) at a similar rate. This combination of dividend income, earnings growth, and potential for price appreciation should enable Williams to generate strong total profits in the coming years.
AI-powered growth potential
Nvidia has been an early beneficiary of the AI boom. However, the technology will likely lead to growth for many other sectors, including natural gas. The market has yet to fully appreciate the growth potential of cleaner fuels, which allows investors to get in early and potentially achieve high-octane returns. EQT and Williams stand as some of the biggest beneficiaries, given their proximity to where tech companies are building Data centers
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Matt DiLallo has positions in EQT. The Motley Fool has positions and recommends EQT and Nvidia. The Motley Fool recommends Dominion Energy. The Motley Fool has a Disclosure Policy.
Beyond Nvidia: AI could fuel high-powered growth for these underappreciated stocks. Originally published by The Motley Fool.