Goldman Sachs Projects $700 Billion in Artificial Intelligence (AI) Capex This Year. Here Are My Top Stocks To Buy.
Goldman Sachs (NYSE: GS) is one of many companies making bold predictions about the spending needed to build artificial intelligence (AI) infrastructure. It believes it to be around $500 billion, but suggests that $700 billion would be more in line with the high levels of phone usage seen in the late 1990s.
Even at $500 billion, that’s a lot of money to spend in a short period of time. Bottlenecks are likely to appear and delay the amount invested. Brookfield Renewable (NYSE: BEP)(NYSE: BEPC) it is already helping to solve an important problem in the development of AI, and will benefit for years to come. Here’s why you might want to buy this clean energy stock today.
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One of Brookfield Renewable’s biggest selling points in the AI buildout is that it already works with it. Microsoft (NASDAQ: MSFT) again Letters of the alphabet (NASDAQ: GOOG) Google. Between these two technology giants, it has an estimated pipeline of 13.5 gigawatts of demand to satisfy. That’s just news, as Brookfield Renewable continues to work to secure more long-term deals and has a large portfolio of existing clean and renewable energy contracts.
As a business, Brookfield Renewable is a very attractive partner for companies building AI infrastructure. It carries assets across solar, wind, hydroelectric, and nuclear power, as well as storage. It also operates in North America, South America, Europe and Asia. Basically, it can provide clean energy almost anywhere it is needed. The Google deal stands out in this regard, as it is directly related to hydroelectric power.
There are two main ways that Brookfield Renewable can benefit. First, artificial intelligence is power-hungry, therefore there is a noticeable demand for newly developed production equipment. Second, the demand for electricity from the AI infrastructure being built is likely to be long-term. Brookfield Renewable’s business of building clean energy assets that sell power under long-term contracts is a good fit. And profits will accrue to investors for years, as cash flow generated by deals like those with Microsoft and Google will support Brookfield Renewable’s continued profit growth.
That said, there are two different classes of Brookfield Renewables. They represent the exact same business and have the same payment for the same profit. However, they offer a different yield. There is a logical reason for this.
Many institutional investors are restricted from buying limited partnerships, so demand for Brookfield Renewable Corporation is higher than demand for Brookfield Renewable Partners. That is an opportunity for small profit investors, who should be more comfortable with owning a partnership. The corporate shares category yielded 3.9% and the partnership units yielded the highest yield of 4.9%.
Both share classes have benefited from the 5% annual dividend growth Brookfield Renewable has achieved over the past decade. Looking ahead, the goal is annual dividend growth of 5% to 9% each year. Given the strong demand from AI and the long-term contracts it is signing, there is no reason to believe that Brookfield Renewable cannot achieve its profit growth goals.
Brookfield Renewable’s story does not end in 2026. In fact, this one year is probably the first chapter of a very long book. Every AI data center being built will need reliable power for years, even if capital gains cool faster than investors hope. That fact should make Brookfield Renewable a solid buy for diversification investors today and to hold for decades to come.
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Reuben Gregg Brewer holds positions in Brookfield Renewable Partners. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, and Microsoft. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a policy of disclosure.
Goldman Sachs Projects $700 Billion in Artificial Intelligence (AI) Capex This Year. Here Are My Top Stocks To Buy. was first published by The Motley Fool
