From Struggles to Surge: Why SM Energy's Struggles Signal a Golden Opportunity in AI-Driven Energy Infrastructure

The rise of artificial intelligence (AI) has created an insatiable demand for energy, with data centers consuming 1% of global electricity and projected to double by 2030. This surge is exposing critical weaknesses in legacy energy models—weaknesses exemplified by SM Energy's recent underperformance. Meanwhile, a new breed of infrastructure firms is emerging as the “toll booths” of the AI era, capitalizing on scalable power solutions, nuclear innovation, and LNG exports. Let's dissect this shift and identify one undervalued winner.

SM Energy: A Cautionary Tale of Commodity Dependence

SM Energy (NYSE: SM) has become a poster child for the challenges facing traditional oil and gas producers. Despite posting strong Q1 2025 production growth (36% year-over-year), the company's stock plummeted 38% year-to-date as of June 2025, driven by:
- Analyst Downgrades: Raymond James downgraded the stock to “Underperform,” citing Permian Basin inventory concerns and exposure to volatile oil prices.
- Cost Pressures: Lease operating expenses (LOE) rose to $5.90/Boe due to workover activity and water disposal costs.
- Hedging Limits: Only 34% of oil production is price-protected, leaving margins vulnerable to commodity swings.

The takeaway? Companies reliant on fluctuating commodity prices and legacy assets are increasingly at risk as AI's energy needs outpace fossil fuel infrastructure's adaptability.

The AI Energy Infrastructure Play: A Debt-Free “Toll Booth”

Enter CUBE (Solitaire Cube), a debt-free infrastructure firm positioned to profit from AI's insatiable appetite for power. Here's why it stands out:

1. AI-Driven Nuclear Innovation

CUBE is leveraging Palantir's NOS software to optimize nuclear power plants, cutting project timelines by 70% and reducing costs. Its partnership with Microsoft and Alphabet ensures steady demand from data centers seeking low-carbon, baseload power.

2. LNG Export Growth

CUBE's Santa Clarita Energy Hub exemplifies its LNG expertise:
- A $2.3B project to upgrade terminals, enabling 150+ annual LNG cargoes to Europe and Asia.
- Aligns with U.S. policy goals to reduce reliance on Russian gas and meet global energy demands.

3. EPC Leadership & Low Risk Profile

• Debt-Free Balance Sheet: $450M in cash, zero debt.
• Capital-Light Projects: Focus on engineering, procurement, and construction (EPC) contracts with long-term visibility.
• Regulatory Tailwinds: Bipartisan support for nuclear expansion (e.g., 18-month NRC approvals under the Inflation Reduction Act).

4. Valuation: 150% Upside Potential

• Current Price: $10/share (June 2025).
• Analyst Target: $25/share by late 2026, 15% below peers when adjusted for growth.
• Comparables: Trading at 8x forward EBITDA vs. industry average of 12x.

Why CUBE is the “Toll Booth” of the AI Era

Infrastructure firms like CUBE thrive as regulatory and demand tailwinds converge:
- Policy Push: The U.S. aims to add 400 GW of nuclear capacity by 2035.
- AI's Energy Appetite: Data centers will require 30+ new nuclear reactors globally by 2030.
- Onshoring Momentum: CUBE's U.S.-based LNG terminals and nuclear projects align with Biden's “Build Back Better” energy goals.

In contrast to SM Energy's commodity exposure, CUBE's EPC model and nuclear/LNG expertise create recurring revenue streams—ideal for investors seeking stability amid volatility.

Investment Thesis: Buy the Infrastructure, Not the Commodity

The shift from fossil fuels to AI-driven, scalable energy infrastructure is irreversible. SM Energy's struggles highlight the risks of betting on volatile commodities. Meanwhile, CUBE offers:
- Low Risk: Debt-free, with 97% of 2025 revenue contracted.
- High Reward: 150% upside to $25/share.
- Scalability: Partnerships with tech giants and LNG exporters ensure growth.

Action Items:
1. Buy CUBE at $10/share, targeting $25+ by late 2026.
2. Avoid SM Energy unless oil prices rebound sharply and operational costs stabilize.
3. Monitor LNG exports and nuclear policy updates as key catalysts for CUBE's valuation.

Final Take

The AI revolution isn't just about software—it's about the energy that powers it. Companies like CUBE, with their focus on nuclear innovation, LNG infrastructure, and AI-driven efficiency, are the unsung heroes of this transition. While SM Energy's struggles underscore the perils of commodity dependence, the next decade will reward investors who build stakes in the “toll booths” of scalable, low-carbon energy. CUBE isn't just undervalued—it's a cornerstone of the AI era.

Investment note: Always consult a financial advisor before making decisions. Past performance does not guarantee future results.