Wells Fargo’s brokerage, investment and financial advisory division highlights one market sector that could benefit greatly from growing investments in artificial intelligence (AI) and data centers.
Wells Fargo Advisors say that current stock market performance is driven by investments in artificial intelligence (AI) and data centers. According to Wells Fargo Advisors, utilities are one of the main beneficiaries of these fast-growing investments.
“As a key supplier in the data center landscape, the utilities sector is riding this wave of demand and has achieved strong returns, a trend we expect to continue.”
Wells Fargo Advisors says electric utilities are “likely to see the largest data center benefit” compared to other subsectors.
“As owners of power generation and distribution assets, utilities, and especially electric utilities, will benefit from this long-term infrastructure buildout. In fact, many have already raised long-term annual earnings growth prospects to the single- to low-double-digit range. Combined with a dividend yield of 2% to 3%, this supports, in our view, attractive total return prospects.”
In addition to electric utilities, Wells Fargo Advisors says other utility subsectors will also benefit, but on a smaller scale.
“However, electric utilities do not have a monopoly on power demand in data centers. Natural gas distributors (including utilities), producers (energy companies), and pipeline operators also benefit from supplying fuel or building on-site power generation on data center campuses.”
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