The AI Revolution: A Shift in Focus
As the artificial intelligence (AI) revolution continues to transform industries, investors are keenly watching the winners and losers in this rapidly evolving space. A recent statement by Microsoft CEO Satya Nadella has sparked concern for Nvidia, the current leader in AI value gains. However, Nadella’s words could be a blessing in disguise for a certain commodity stock, which is poised to benefit from the growing demand for clean energy.
A Shift in Supply and Demand
Nadella’s statement suggests that Microsoft is no longer chip supply constrained, but rather power constrained. This could mean that demand for AI is slowing, chip supply is improving, or a combination of both. The implications are significant, as Microsoft has been Nvidia’s largest customer, accounting for 20% of its sales over the past year.
The Rise of In-House Designed Chips
One possibility is that Microsoft is seeing its in-house designed Maia accelerators ramping up to greater volumes in mid-2025. This could alleviate its chip constraints and reduce its dependence on Nvidia’s expensive GPUs. Microsoft’s Maia chips, introduced just a year ago, have had time to hone their design and ramp up manufacturing supply.
The Growing Demand for Clean Energy
The AI revolution is driving unprecedented demand for electricity, outstripping growth rates of the past 10 years. To meet this demand, clean energy sources are being explored. While renewables will play a role, they have limitations. Nuclear energy, despite its promise, faces significant time and cost lags. This leaves natural gas as a viable option to quickly deploy at existing or easy-to-build facilities.
Natural Gas: The Quintessential AI Commodity
Famous hedge fund manager David Tepper and Morgan Stanley energy analyst Stephen Byrd agree that natural gas will be essential to meet the power needs of AI data centers. EQT Corporation, with its vast acreage in the Marcellus and Utica shale formations, is well-positioned to benefit from this growing demand. Its recent acquisition of midstream company Equitrans has turned EQT into the only vertically integrated play in the Basin, with production, gathering, processing, storage, and pipelines.
EQT: A Low-Cost Leader
EQT’s acquisition has lowered its break-even costs, making it the lowest-cost producer in the Appalachian Basin. With a break-even price of around $2 per metric million British thermal unit (MMBtu), EQT is confident it can operate at low prices, whereas competitors cannot. This means EQT won’t need to hedge natural gas prices as much, allowing it to realize higher prices should the market surge.
A Potential AI Winner
Trading at just 18 times 2025 earnings expectations, EQT could be one of the biggest “AI winners” in the year ahead, potentially even surpassing Nvidia’s stock appreciation. As the AI revolution continues to drive demand for clean energy, EQT is poised to benefit from its low-cost leadership and vertically integrated model.
Leave a Reply