Has the AI Power Trade Bottomed?

The đŸ”„H.E.A.T.đŸ”„ Formula : AI Driven Insights to Spark Your Portfolio

Author

Matthew Tuttle
March 13, 2025

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Market Recap

VIX almost hitting 30, the S&P officially being in correction territory, and cooler than expected CPI set the stage for another bounce attempt yesterday. Next week is the NVDA GTC conference and FOMC, so there are some potential positive catalysts if the bulls want to take charge. However, you also have this
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American consumers have had a lot to fret about so far this year, between never-ending tariff headlines, stubborn inflation and most recently, fresh fears about a recession. These concerns seem to be hitting spending by both rich and poor, across necessities and luxuries, all at once.

A couple of negative earnings reports in the AI space don’t help either


I don’t think this is over, and would still be very cautious. Market’s don’t go down in a straight line without a bounce at some point. Tuesday’s low of $552.02 now becomes key support on SPY
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I still like TLT, but it’s having trouble breaking through the 200 day. I believe that Trump desperately want’s lower long term rates, but that doesn’t mean the market will give them to him
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Bitcoin is trying for an undercut and rally at the 200 day
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Has the AI Power Trade Bottomed?

Amazon, Google, and Meta Sign Pledge to Boost Nuclear Energy-Barron’s

The tech behemoths said they had added their names to the World Nuclear Association’s “Large Energy Users Pledge,” which envisions at least tripling global nuclear capacity from current levels by 2050. Nuclear energy currently provides around 9% of the world’s electricity from about 440 power reactors.

Why AI Needs More Power

The energy demand from AI, especially from hyperscale data centers running massive models like ChatGPT, Claude, and Gemini, is extraordinary. These data centers consume enormous amounts of electricity—often equivalent to entire cities. The rise of advanced AI systems like DeepSeek and China's quantum computer Zuchongzhi-3, while impressive, does not fundamentally alter AI’s demand trajectory for power. Regardless of the geographic origin, advanced AI technologies universally demand extensive, reliable energy.

So while you can argue about monetizing capex, or who is going to have the better model, you can’t argue about the need for more power. IMHO the only way this works long term is nuclear, however, we are still a ways away from that. My favorite name in the space is BWXT, which looks to be trying to find a bottom
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Other names like OKLO and SMR are more speculative but don’t look that bad here either.

The Coal Stock Bottom?

Interestingly, despite AI’s surging power demand, coal stocks have been selling off, impacted heavily by sustainability initiatives and regulatory headwinds. However, these stocks now seem to be bottoming as valuations reflect deep pessimism. We are adding coal to our ETF model portfolio (hopefully out next week)

I like BTU and CNR here
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Natural Gas:

  • In the short run, natural gas remains essential to AI and data centers due to its readily available infrastructure, reliability, and current cost advantages over nuclear.

  • Nuclear plants take years to permit, construct, and bring online. Until new nuclear capacity materially ramps up (likely beyond 2030), natural gas will continue to fill the immediate demand gap created by the explosion of AI-driven data center construction.

  • Rapid Data Center Growth: AI applications, especially highly sophisticated Generative AI models like those from DeepSeek and Manus, require massive energy infrastructure. Even though nuclear is an ideal long-term choice, current nuclear permitting processes, construction timelines, and regulatory hurdles mean that gas will remain critical at least through 2030.

  • Grid Reliability: Natural gas-fired plants provide flexible, quickly dispatchable energy to support intermittent renewables and baseload nuclear energy. Until battery storage becomes vastly more cost-effective and scalable, gas is still a critical stability resource for the power grid.

My favorite name in this space is EQT, which had an undercut and rally at a couple of key lows
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The Geothermal Opportunity:

Innovative private startups like Quaise Energy, which uses groundbreaking technology to vaporize rock and access geothermal energy deep beneath the Earth’s surface, illustrate a new frontier. Although private, Quaise’s breakthrough highlights geothermal’s potential as a scalable and reliable power source. Ormat Technologies (ORA), which I wrote about last week, stands out as an exceptional public-market geothermal play, uniquely positioned to capture growth driven by increasing geothermal adoption worldwide.

In power companies, but GEV and CEG also look like they are trying to find a bottom
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