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Will National Energy Suppliers Get An AI Boost?

Analyst Team trader
Updated 14 May 2024

The era of artificial intelligence (AI) is not just transforming the technological landscape but is also having profound implications on the global energy sector. One area AI is expected to impact significantly is the demand for electricity, primarily driven by the proliferation of data centres. Such an uptick in demand is projected to resonate through the market, potentially benefiting utility companies like National Grid (LON.NG.) in the UK, or Engie (EPA: ENGI) in France.


National Grid, a key player in the transmission of electricity, stands at the crossroads of this burgeoning requirement for power. As AI technologies evolve and permeate various sectors, the demand for electric power is estimated to grow exponentially. Analysts at Goldman Sachs anticipate that the power demand for data centers alone could escalate at an annual rate of 15% between 2023 and 2030. This expectation sets a promising future for utilities, as they may see an uptick in revenue with this increased demand.

Amidst this forward-looking scenario, National Grid is not only expected to see an increase in its power transmission activities but is also likely to face the need for substantial infrastructural upgrades. John Pettigrew, the CEO of National Grid, has emphatically emphasized the necessity for innovative solutions and decisive actions to enhance the transmission network to support the upswing in power consumption.

Investors eyeing National Grid shares (NG.L) have reasons to consider its current stock valuation to be reasonable, as the last 12 months has seen a decline in share price. just as the AI industry has been booming. Whilst the UK may not be at the centre of the AI development, the impacts on infrastructure will be global. With a dividend yield of approximately 5.11%, National Grid shares represent a niche way to gain exposure to AI.

As you can see, is a rather similar story at Engie, with the share price also dropping (-1.38%) over the past 12 months, and offering a similar dividend yield of 5.12%.

Taking into account analysts covering the National Grid gives us an interesting perspective, with the consensus mark being 1,226.40p, more than 12% above the current price. Layering in dividends, and that represents a healthy upside on an infrastructure firm so essential to the UK. The high price target of 1,330p set against a low of 1,092p puts the current price in range.

Whatever your view, the journey ahead is likely not without its hurdles. National Grid will encounter challenges as it embarks on upgrading infrastructure to accommodate the additional load, and the company's significant debt levels are a factor that are not helped by sustained levels of high interest rates.

Despite these challenges, the convergence of AI-driven power demand and national energy suppliers' strategic positioning within the energy sector suggests that the company could indeed power significantly higher in the years ahead.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.