The Energy Sector as an Overlooked AI Infrastructure Play: Powering the AI Revolution

The artificial intelligence revolution is no longer a distant promise—it's here, and it's hungry. By 2025, U.S. data centers alone are projected to consume 65 gigawatts of power annually, with AI-driven workloads accounting for a growing share of this demand. Yet, while the tech sector dominates headlines, a quieter but equally critical story is unfolding in the energy and utilities space: the race to build the infrastructure that will power the AI era. For investors, this represents a golden opportunity to identify undervalued energy and utility stocks poised to benefit from the surge in power demand driven by generative AI.

The Hidden Infrastructure Behind AI's Appetite for Power

AI's exponential growth has created a paradox: the very technologies designed to optimize efficiency are straining the energy grid. Data centers, which now consume 2% of global electricity, are expected to double their power usage by 2030. This surge is not just a numbers game—it's a structural challenge. Deloitte's 2025 AI infrastructure survey revealed that 79% of respondents expect AI to increase power demand through 2035, with grid stress, supply chain bottlenecks, and regulatory hurdles emerging as top concerns.

Enter energy companies like Kraken Technologies and Bloom Energy, which are redefining how power is generated, distributed, and consumed. Kraken, for instance, uses AI to cluster consumers based on energy consumption patterns and optimize renewable energy distribution with 90% accuracy. Its platform manages over 5 gigawatts of flexible energy supply and has offset 14 million tons of CO₂ in 2024 alone. Meanwhile, Bloom Energy's hydrogen-powered fuel cells are being deployed at Oracle Cloud Infrastructure (OCI) data centers, offering a scalable, low-carbon solution for AI's insatiable appetite for electricity.

Undervalued Stocks in the Energy Transition

The energy sector's role in the AI revolution is not limited to innovation—it's also a treasure trove of undervalued stocks. Here are three standout picks:

1. Alphabet (GOOG): The Clean Energy Powerhouse

Alphabet, parent company of Google, has quietly become a leader in renewable energy procurement. With over 170 power purchase agreements (PPAs) and a $3 billion investment in modernizing hydropower plants, Alphabet is securing gigawatts of clean energy to power its AI infrastructure. Despite a 27% increase in energy use in 2024, the company reduced data center emissions by 12%, showcasing operational efficiency. At a 26% discount to intrinsic value, Alphabet is undervalued relative to its dominance in AI and renewable energy procurement.

2. NextEra Energy (NEE): The Grid's New Backbone

NextEra Energy, the world's largest wind and solar company, is a cornerstone of the clean energy transition. Its Real Zero initiative aims to eliminate carbon emissions by 2045, and its focus on green hydrogen and long-duration storage positions it to bridge the 24/7 clean energy gap. With a 10% compound annual growth rate (CAGR) over the past three decades and a 12% annual funds from operations (FFO) growth target, NextEra is a reliable cash-flow generator for the AI-driven energy future.

3. Bloom Energy (BE): Fueling the AI Era

Bloom Energy's recent partnership with Oracle is a game-changer. By deploying hydrogen-powered fuel cells at Oracle's data centers, Bloom is not only securing a major client but also validating its technology in a high-stakes environment. The company's Q1 2025 results were stellar: revenue rose 38.6% year-over-year to $326 million, and non-GAAP gross margins expanded to 28.7%. The partnership also unlocks access to U.S. tax credits like 48E and 45V, which could reduce deployment costs by up to 30%. Despite a recent 8% stock price drop, Bloom's intrinsic value is being underestimated.

The Risks and the Road Ahead

While the energy sector's AI alignment is compelling, risks remain. Regulatory shifts, such as changes to the Inflation Reduction Act's tax credits, could disrupt profitability. Additionally, competition from traditional utilities and emerging technologies like small modular reactors (SMRs) could challenge existing players. Investors should also monitor the pace of AI adoption—slower-than-expected growth in data center demand could dampen returns.

However, the long-term outlook remains bullish. Morgan Stanley forecasts a 45-gigawatt power shortfall for U.S. data centers by 2028, creating urgency for solutions like Bloom's fuel cells and Kraken's AI-optimized grid. For investors with a multi-year horizon, the energy sector offers a unique blend of innovation, scalability, and undervaluation.

Final Take

The AI revolution is not just about algorithms—it's about the power to fuel them. Energy and utility stocks like Alphabet, NextEra, and Bloom Energy are quietly building the infrastructure that will underpin the next era of technology. While these companies may not have the same buzz as their tech counterparts, their strategic positioning and financial metrics make them compelling buys for investors seeking exposure to the AI-driven energy transition.

As the grid meets the cloud, the energy sector is no longer an overlooked play—it's the backbone of the future.