Macro

Goldman: Buy Calls on Stocks for AI-Driven 8% Power Surge by 2030

Goldman Sachs advises buying call options in stocks like Kinder Morgan and First Solar, anticipating an AI-driven 8% U.S. power demand surge by 2030.

By Bill Bullington

5/15, 10:17 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
EQT Corporation
First Solar, Inc.
Kinder Morgan, Inc.
Southern Company
DBA Sempra
article-main-img

Key Takeaway

  • Goldman Sachs projects AI and data centers to drive an 8% U.S. power demand by 2030, doubling from the current 3%.
  • Recommends buying call options in Kinder Morgan, EQT, First Solar, Sempra, and Southern Company due to expected demand surge.
  • Targets include a 43.3% upside for First Solar and over 5% for others, highlighting significant growth opportunities in energy stocks.

AI and Data Centers Drive Power Demand

Goldman Sachs projects a significant surge in U.S. power demand over the next decade, primarily fueled by artificial intelligence (AI) and data centers. These sectors are expected to account for 8% of U.S. power demand by 2030, up from the current 3%. The investment bank forecasts that 60% of this growth will be powered by natural gas, with renewables contributing the remaining 40%. This shift presents a substantial opportunity for investors, particularly in natural gas, renewable energy, and utility stocks.

Strategic Investment Opportunities Identified

In light of the anticipated power demand surge, Goldman Sachs recommends buying call options for stocks most levered to this trend. The investment bank highlights pipeline operator Kinder Morgan, natural gas producer EQT, solar panel manufacturer First Solar, and power companies Sempra and Southern Company as particularly attractive investments. These recommendations are based on the stocks' current volatility being well below their median implied volatility. Goldman's price targets suggest an upside of 8% for Kinder Morgan, 5.6% for EQT, 16.1% for Sempra, 5.5% for Southern, and a notable 43.3% for First Solar.

Market Optimism Amid Earnings Surprises

The S&P 500 and the Dow Jones Industrial Average have seen significant gains, supported by robust earnings reports. Nearly 80% of S&P 500 companies have surpassed Wall Street forecasts, marking the Dow's best week of the year and its eighth consecutive winning session. Despite concerns over inflation and potential Federal Reserve policy shifts, the strong performance in the first quarter of 2024 has fueled market optimism. However, Goldman Sachs cautions about potential market volatility ahead, driven by higher inflation and the possibility of a more hawkish Fed stance.

Street Views

  • Goldman Sachs (Bullish on Kinder Morgan, EQT, First Solar, Sempra, and Southern Company):

    "AI and data centers will consume 8% of U.S. power demand by 2030, compared with 3% currently... Natural gas will power 60% of the growth, while renewables are expected to make up the other 40%."