Some thought it was a joke, some thought it was bluster, but now there’s a clarity to the direction of AI infrastructure development inside the United States.
Even when Project Stargate was announced a month ago, it sounded like something out of a sci-fi flick, or even some ghastly, decades-old CIA operation that we’re only learning about now.
For all the braying and crowing we’ve seen for more than a year over data centers, we can’t help but sit back and watch it all come together.
Last week, it was the announcement from Microsoft that it was bringing two more data centers to San Antonio, Texas. Each single-story facility would come with a hefty price tag of roughly $350 million.
Yesterday, it was Apple’s bombshell news that it was planning a new factory in Texas. This new building will manufacture servers for the company’s AI data centers. In fact, Apple is now planning to invest over $500 billion inside the United States to support U.S. manufacturing.
But this was only the latest salvo in good news for the AI boom in the Lone Star State. A month ago, there were reports of a $1 billion data center about to be built just outside of Dallas.
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Lone Star Electricity
When the tea leaves were read years ago, there was only one obstacle for the AI boom to overcome; one massive elephant sitting smack dab in the middle of the room that everyone loves to tip-toe around: Energy.
Although the veteran members of our investment community here know full well that Virginia is the leading global hub for data centers, Texas is the second-largest hub in the United States.
And with great AI power comes great energy demand.
At first glance, taking advantage of the billions of dollars being directed toward Texas data centers appears to be an open and shut case. After all, the state has more wind turbines than anyone else — over 15,300 at last count — and is ranked at the top of the list when it comes to growth in added solar capacity.
Things get a little trickier here, and it’s important to not miss the forest for the trees.
You see, there’s a huge catch when it comes to powering those future data centers, which I’ll note is expected to account for more than 12% of the entire United States’ electrical demand within the next three years.
It all comes down to those centers’ need for consistent, reliable baseload power. Unfortunately, that’s something that those 15,300 wind turbines simply cannot provide to companies like Apple and Microsoft.
And it’s that intermittency issue that is driving the Trump administration’s latest energy directive — for U.S. power plants to boost capacity by up to 15%. Of course, this is in addition to expediting the construction of new power plants.
This, dear reader, is where the President gets into a little trouble.
Expecting our aged coal-fired fleet of power plants to pick up that slack is an exercise in futility. The average age of a coal-plant in the U.S. is 45 years old, and we’re not building any more.
The situation gets worse each year, too. Approximately 28% of coal-fired plants in the U.S. are planning on being retired by 2035, with some reports suggesting that nearly 70,000 megawatts of coal-fired capacity will be either retired or converted to gas within the next five years.
No matter what the headlines say, coal won’t be the answer to powering our future AI infrastructure. Even when President Trump starts peeling back regulations that have been a bane for coal-fired plants, it won’t be enough.
If you want to break things down even further, keep in mind that out of the 300 power plants churning out power in Texas, only about 15 of them are coal-fired. But hey, sometimes a picture is worth a thousand words:
Folks, it’s not even close. There should be no illusions as to where Texas will get its electricity, either.
Today, the window has closed for those of you hoping to capitalize on colder weather trades. It’s tough to look at the warmer forecasts ahead and want to risk your hard-earned cash in leveraged gas ETFs that topped out recently.
But successfully investing in natural gas has never been about the short-term. In Texas, that means taking advantage of midstream players like Plains All American Pipeline (NASDAQ: PAA) or Targa Resources (NYSE: TRGP), which happen to be two of the largest gas pipelines plays in the State.
That’s where I’d start.
Until next time,
Keith Kohl
Check us out on YouTube!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.
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