Anika Begay
Data center power demand is expected to triple by 2030 as the use of artificial intelligence increases at a rapid pace, driving an explosion of renewable energy and natural gas, according to Mizuho Securities. Data center demand will reach 400 terawatt hours, or 50 gigawatts per year, representing about 9% of total U.S. electricity demand by the end of the decade, according to a 38-page Mizuho report released Friday. About 30% of current data center demand is in the Mid-Atlantic region, followed by Texas, which is home to 13%. Renewables are expected to grow the most due to the tech sector’s climate commitments, with solar demand increasing by 7 gigawatts per year and wind growing by 5 gigawatts per year through 2030. That represents a 21% and 39% upside for solar and wind, respectively, compared to Mizuho’s current forecasts. In renewables, solar tracker companies like Nextracker and Array are likely to benefit the most because they can “easily scale capacity through contract steelmakers in a light way,” analyst Maheep Mandloi told clients. Nextracker could see $4 upside to Mizuho’s current price target of $59 per share based on demand for generative AI, assuming it has a 45% market share in the U.S., while Array could capture $2 upside to Mizuho’s price target of $13 per share. Solar module stocks like First Solar, on the other hand, likely won’t move much until the outcome of November’s presidential election determines whether the Inflation Reduction Act remains intact, Mandloi wrote. Companies like First Solar are also likely to face increased competitive pressure if the IRA remains in place, the analyst said. However, First Solar could see $17 upside from its current price target of $274 per share. Meanwhile, natural gas demand is expected to rise to 4 Bcf/d by 2030, or 4% of current U.S. production, according to Mizuho. If renewables expansion proves slower than expected, gas demand could rise to 8 Bcf/d by the end of the decade. Gas will largely play a backup role, filling the gap when solar and wind power decline due to weather and bolstering supplies in parts of the country where data centers aren’t located next to renewables, the report said. Gas producers like EQT Corp. are likely to be the biggest beneficiaries because they supply key data center markets in the mid-Atlantic and Southeast, Mizuho analyst Nitin Kumar told clients. Pipeline operators Williams Companies and Kinder Morgan also stand to gain from their ownership advantage because there’s uncertainty about whether new interstate pipelines will be built in the U.S., analyst Gabriel Moreen wrote. Independent power producers like Constellation Energy are also well-positioned if they can sign deals to power data centers using their nuclear fleet, analyst Anthony Crowdell said. While enthusiasm for AI energy demand is high, Mizuho analysts warned that the sector also faces multiple bottlenecks, with new energy projects taking up to five years to get approved and connected to the grid. “Renewable investment could also be delayed if a new administration rescinds Inflation Reduction Act (IRA) incentives or imposes higher import tariffs,” the analysts wrote.
