AI Stocks to Watch — Alternatives That Most Investors Miss Part 2

Every AI stock on our watchlist has been quietly worrying about the one thing that can bring their party crashing down. 

Naturally, I’m talking about the one thing that every single tech company needs to succeed: Energy. 

A few days ago, we delved into an alternative AI story that hasn’t really hit the mainstream media yet;  It’s a blindspot for many investors. 

While some massive players like Amazon, who have billions of dollars in their war chest to throw at projects like the 100% nuclear-powered data center that is going to be built in Pennsylvania, it’s going to take time to develop those ambitions. 

Truth is, every year that passes with more and more coal plants shuttering is simply a ticking time bomb threatening the AI boom. 

Fortunately, there’s another alternative that giants like Nvidia (NASDAQ: NVDA) have come to rely on to keep the power flowing. 

So let’s dive right into this AI rabbit hole…

AI Stocks To Watch – The Underdog Energy Stocks Powering AI Technology

The long-time readers in our Energy & Capital investment community know full well that natural gas is an underdog investment that will surprise investors in 2024. It doesn’t take much to see why, too. 

For the past 15 years, our glut of natural gas has led to some of the biggest opportunities for individual investors like us. The sudden surge in supply thanks to the shale boom is the reason why companies like Cheniere decided to reverse our LNG import facilities to allow U.S. natural gas to flow into global markets. 

That’s a significant event if you think about it.

Up until the point that U.S. LNG exports started shipping out of Sabine Pass way back in 2016, we were limited to using pipelines that could only transport our gas to Canada and Mexico. Essentially, the rise of U.S. LNG exports were an enormous investment opportunity, and early investors were greatly rewarded. 

However, it wasn’t just the global community that took advantage of the flood of supply. Here in the U.S., natural gas became the lifeblood of our economy. 

I mentioned last time that 43% of our electrical generation came directly from natural gas. In fact, U.S. demand hit new record highs in 2023, averaging 89.1 billion cubic feet per day. Our thirst for natural gas has grown by 4% annually for the past five years. 

And you shouldn’t be surprised to learn WHERE we’re using that energy, either. 

Go ahead and take a look for yourself:

As you can see, the largest growth is taking place in electrical power generation. 

Are you starting to see now?

Ah, but there’s another side to this underdog story, dear reader. It’s not enough to simply look at one side of the fundamentals, see soaring demand, and then instantly dive in head first. 

You see, there’s been one major obstacle to a true natural gas comeback for nearly a decade — that pesky supply glut!

When it comes to U.S. natural gas production, there’s been a bit of a double-edged sword thanks to surging oil production. So not only are we seeing areas like the Applachia region — home to the Marcellus shale — pumping out more nearly 36 billion cubic feet of natural gas every day, but associated gas production from oil wells has helped keep the glut going. 

As you might expect, that oversupply has crushed the price environment. 

Now queue the natural gas comeback…

My readers know better than anyone that the cure for low energy prices IS low energy prices. With the brief exception of Russia invading Ukraine in 2022, the truth is that we’ve been spoiled on cheap natural gas here in the United States. 

It’s gotten to the point that companies have begun curtailing output to bolster prices. More importantly, U.S. oil production isn’t going to climb much higher from current levels, which means there won’t be much growth in associated gas production. 

And throughout these bullish supply catalysts, demand will continue to creep higher — the development of AI technology will ensure that much for us. 

But I don’t want you to think about where the natural gas markets are right now, but rather where they’re heading. If natural gas was booming right now, it’s all everyone would hear about in the media and investors looking to capitalize on it would be late to the party. 

You couldn’t really ask for a better buy, and I’m not talking about EQT Corp (NYSE: EQT), the largest gas producer in the U.S. in 2023; the stock is a little too expensive for my taste right now. 

Taking your time to uncover those hidden investment gems trading at attractive levels, you’ll find gas plays like Range Resources (NYSE: RRC) that are worth a second look. 

If that’s a little small for your taste, even the mega caps still hold some appeal. 

Last year, Chevron (NYSE: CVX) pumped more than 2 billion cubic feet of natural gas inside the United States, and investors can still pick up shares around 13 times their forward earnings today. Of course, that’s on top of the 4% annual yield you’ll also be getting from its dividend. 

We’re close to the turning point for natural gas, and it may turn out to be the alternative play on AI that bears the most fruit for early investors. 

Only time will tell. 

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.