By Tae Kim
Advancements in artificial intelligence technology are driving the construction of larger data centers, which is providing attractive opportunities for investors.
KeyBanc Capital Markets' research team on Thursday shared its top ideas about what companies will benefit from the AI infrastructure buildout. The stocks include Nvent, Constellation Energy, Entergy, and Portland General Electric. All four stocks have Overweight ratings.
"For our names exposed to data center hardware & infrastructure, C3Q24 earnings season largely continued to showcase robust demand trends around the theme," the team wrote.
Nvent stands to gain because its liquid cooling solutions work with the latest Nvidia AI server systems. The company has said it is "collaborating with NVIDIA on NVL72 reference design architectures," the team wrote. "We get the sense NVT's partnerships/customer base with hyperscalers/co-locators/OEMs extend much deeper than the relationships already communicated."
KeyBanc has a $84 target for Nvent shares, while the stock was up 0.7% to $78.50 on Friday.
Constellation Energy and Entergy are among the companies that supply electricity to technology companies to power new data centers, and demand is growing. KeyBanc cited a recent deal for Constellation to restart a Pennsylvania nuclear reactor to provide power to Microsoft as a positive development, and an indication of what could follow.
"Constellation Energy is continuing negotiations with a number of potential data center customers for co- location deals, and is making significant progress on contracting," the team wrote. KeyBanc has a target of $298 for Constellation's stock price and call of $162 forecast for Entergy stock.
Constellation was down 2.3% to $245.96, while Entergy rose 1% to $153.
Portland General Electric is also seeing revenue growth from industrial, semiconductor-manufacturing, and data-centers customers, says the research firm. KeyBanc's price target for Portland General Electric stock is $52.
Portland General rose 0.3% to $47.73.
Write to Tae Kim at tae.kim@barrons.com
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November 22, 2024 14:17 ET (19:17 GMT)
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