Brookfield Renewable Stock Turns into an AI Play

The AI (artificial intelligence) megatrend is here to stay. A report from Precedence Research forecasts the AI market to expand from US$454 billion in 2022 to US$2.6 trillion in 2032, indicating an annual growth rate of 19%. 

Due to this rapidly expanding market, investors are bullish on companies like Nvidia, which sells chips to power AI platforms. Early movers in the AI segment, such as Microsoft, have also generated outsized gains in the past 18 months. 

However, clean energy companies like Brookfield Renewable (TSX: BEP.UN) are also positioned to benefit from rising AI demand. Let’s see how. 

Energy Demand is Forecast to Rise 

Energy producers are planning for a significant increase in demand over the next decade as AI platforms such as ChatGPT continue to gain popularity. According to Wells Fargo, electricity demand in the U.S. is expected to grow by 20% through 2030 after a decade of flat power growth. 

The investment bank emphasized that AI data centers in the U.S. are forecast to add 323 terawatt hours of electricity demand by the end of 2030. This indicates that power demand from AI might be seven times greater than the annual electricity consumption of New York, which is roughly 48 terawatt hours. Moreover, Goldman Sachs expects data centers to account for 8% of electricity consumption in the U.S. by 2030. 

This surge in power demand will pose a challenge to big tech companies such as Meta, Microsoft, Alphabet, and Amazon, all of which are looking to power data centers with clean energy. Alternatively, it provides renewable energy giants like Brookfield Renewable a chance to benefit from this substantial secular tailwind. 

Brookfield Partners with Microsoft 

Last month, Brookfield Renewable announced it signed a global renewable energy framework agreement with Microsoft. The tech heavyweight aims to have 100% of its electricity consumption matched by zero-carbon energy purchases by 2030. 

Under this agreement, Brookfield will deliver more than 10.5 gigawatts of new renewable energy capacity in the U.S. between 2026 and 2030. The agreement may also expand to deliver additional renewable energy capacity in the U.S. and other international markets. This incentivizes Brookfield to build a large portfolio of new clean energy projects in the upcoming decade. 

Microsoft explained that the partnership would provide it with access to new renewable energy capacity to support the rising demand for cloud services. This will contribute to the decarbonization of the grid and accelerate the shift to cleaner energy solutions. 

Brookfield Renewable’s CEO, Connor Teskey, stated, “As the global trend of digitalization and the adoption of AI continues to drive growth in demand for electricity, we are thrilled to collaborate with Microsoft to support their customer demand with the build-out of over 10.5 gigawatts of renewable energy capacity.” 

The agreement will be a key driver for Brookfield going forward, as it is almost eight times larger than the largest single corporate power purchase agreement it has signed to date. 

While most AI stocks trade close to all-time highs, Brookfield Renewable stock is down 40% from record prices, allowing investors to buy the dip and potentially benefit from outsized gains over time.