Many technology companies are rapidly developing artificial intelligence infrastructure in a bid to dominate this red-hot market. Artificial intelligence is very power-hungry—its power needs will only increase in the coming years. But it also means there are investment opportunities in the utility sector. Morgan Stanley Investment Management’s Aaron Dunn said the “next big bottleneck” for hyperscalers—those doing massive cloud computing for artificial intelligence applications—is either electricity or fiber optics. He pointed out that this is because large language models require a lot of data center capacity. “This important segment, in my view, is probably the next bottleneck in the growth of artificial intelligence and the growth of data centers and cloud computing environments,” the portfolio manager told CNBC’s “Street Signs Asia.” Dunn runs Morgan Stanley . American Value Fund. That’s why Dunn is “very bullish” on the utility company and has earmarked one stock to invest in: CMS Energy. “I think once data centers start really trying to pull power off the grid, there’s going to be a lot of utilities, whether it’s municipal utilities, utility companies, that have to serve retail customers, (now) it’s a It’s a huge industrial electrical load and it needs to be repaired,” he said. “So, in my view, power supply could become very tight in a few years,” added Dunn, who is also the firm’s co-head of value equity. Dunn said CMS is a company that is “really pushing the envelope” on renewable energy, a strategy that is consistent with many very large companies that are “very focused” on green energy. He added that they want to reduce their carbon footprint and to do that they need renewable energy, so the industry will grow “significantly” in terms of capacity in the United States. “As a result, these utilities … have a very favorable opportunity to deliver solid earnings growth and good returns,” Dunn concluded. In notes sent to CNBC, Dunn also mentioned another stock: Emerson Electric. Dunn is also a portfolio manager of the Eaton Vance Focused Value Opportunities Fund. Since 2014, the fund has outperformed its benchmark in five of the past nine years. Bank of America estimates that the artificial intelligence servers shipped by Nvidia alone consume as much electricity as 20 million U.S. homes. According to Bank of America, data centers contain the vast amounts of computing power required for artificial intelligence workloads and consume 1% to 2% of global electricity. Their electricity consumption will grow at a compound annual growth rate of 11% through 2030, the bank said. —CNBC’s Pia Singh contributed to this report.
