The AI Energy Crisis: How Impax's Hidden Infrastructure Plays Could Power Profits

The world's rush to build AI infrastructure has created a paradox: while algorithms promise to solve humanity's biggest problems, their hunger for energy is already straining global grids. Data centers now consume 2% of the planet's electricity—and that's just the beginning. Enter Impax International Sustainable Economy Fund, which is betting big on an under-the-radar sector poised to profit from this crisis: energy infrastructure firms that supply the reliable power needed to keep AI running.

At the heart of this strategy is Innovex International (INVX), an Engineering, Procurement, and Construction (EPC) specialist in nuclear energy and U.S. LNG exports. The fund's Q1 2025 report positions Innovex as a rare “undervalued” stock with debt-free finances, scalable projects, and exposure to two booming trends—nuclear power's renaissance and Asia's insatiable demand for LNG—both of which are critical to meeting AI's baseload energy needs.

The AI Energy SuperCycle: Baseload Power is the New Gold

AI's reliance on always-on computing has turned baseload energy—power that's available 24/7—into a strategic asset. While renewables like wind and solar are expanding, their intermittency makes them unreliable for hyperscalers like Amazon and Google, which require steady electricity to avoid outages. This creates a massive opportunity for two proven baseload sources:
1. Nuclear Power: 63 reactors are under construction globally, including small modular reactors (SMRs) backed by tech giants like Google.
2. LNG Exports: U.S. LNG shipments hit record highs in 2024, fueled by Asia's energy needs and “America First” policies that treat LNG as a geopolitical tool.

Why Innovex (INVX) is the Fund's Hidden Gem

1. Financial Fortitude in a Volatile Market

Innovex enters 2025 with a $68 million cash balance and a revolving credit facility of $103 million, giving it flexibility to pursue projects without debt. Its Q1 free cash flow of $24 million and an active $100 million share buyback program signal confidence in its valuation.

At 7x earnings, Innovex trades at a discount to its peers. Even a modest expansion to 10x earnings—still below industry averages—would nearly double its stock price, per Impax's analysis.

2. Strategic Acquisitions Fuel Growth

Innovex's recent moves have strengthened its position in both nuclear and LNG markets:
- SCF Machining Corp: Reduced supply chain costs for precision components in reactors and LNG terminals.
- Dril-Quip's Downhole Solutions: Boosted North American revenue by 17% sequentially via high-margin tools for offshore projects.
- VXTe™ Technology: A proprietary system now operational in Brazil's Buzios pre-salt field, enabling faster offshore LNG development.

3. Geopolitical Tailwinds and Scalable Projects

• Nuclear Renaissance: Innovex's EPC expertise is critical to building SMRs and traditional reactors. Tech firms like Google are partnering with governments to fund these projects, creating long-term revenue streams.
• LNG Infrastructure Gap: Morgan Stanley estimates a $200 billion infrastructure deficit by 2028 to meet Asia's demand. Innovex's toll-based contracts for LNG terminals and subsea systems provide stable, commodity-insulated income.

Risks, but Manageable Ones

• Execution Risk: Large EPC projects require flawless execution. A misstep in LNG terminal construction or nuclear permitting could hurt margins.
• Regulatory Delays: U.S. nuclear permitting and LNG approvals face bureaucratic hurdles.
• Oil Price Volatility: Gulf of Mexico operations are exposed to oil cycles, though LNG tolling shields Innovex from commodity swings.

The Investment Case: Buy Now, Wait 24 Months

Impax's “buy” recommendation hinges on two key catalysts:
1. Q2 Earnings: Watch for updates on LNG project wins and nuclear partnerships.
2. Valuation Reassessment: As peers trade at higher multiples, Innovex's undervaluation could correct, especially if its EPC wins accelerate.

The fund forecasts 100%+ returns over 24 months if Innovex's valuation moves to 10x earnings—a conservative target given its financial strength and strategic positioning.

The Broader Play: AI's Energy Infrastructure Needs Are a Decade-Long Trend

The AI energy crisis isn't a fad. Hyperscalers will keep expanding data centers, and their reliance on baseload power will grow. Innovex isn't just a stock—it's a proxy for the infrastructure needed to sustain the AI revolution.

For investors tired of crowded tech bets, this is the under-the-radar opportunity: a debt-free EPC leader with geopolitical tailwinds, undervalued multiples, and a direct link to AI's energy future.

Bottom Line: The Impax International Sustainable Economy Fund isn't just betting on AI—it's betting on the hidden backbone that will keep AI alive. Innovex is the lever to pull.