Investment of $500 Billion in an AI Data Center may Increase Demand for this Essential Energy Source
In a recent announcement, President Trump highlighted several private sector companies collaborating to invest around $500 billion in artificial intelligence (AI) infrastructure. Known as the Stargate project, this initiative, backed by OpenAI, Softbank, and Oracle, will construct 20 data centers across the U.S., with the first underway in Texas.
Due to the high electricity demands of these AI applications, the companies will likely need to build power plants specific to these facilities. Initially, they might turn to natural gas to meet some of their energy requirements. This increased demand for natural gas could help accelerate the fuel's usage.
Several businesses will benefit from this natural gas surge. Natural gas producers can drill more wells, increase output, and require additional infrastructure to support it. Energy midstream companies like Kinder Morgan can expand their systems to take advantage of this rising supply. Utilities will also distribute more gas and build more gas-powered plants.
Kinder Morgan discussed the impact of AI on natural gas demand during its fourth-quarter conference call. According to CEO Kim Dang, natural gas demand will grow by 28 Bcf (billion cubic feet) a day between now and 2030. While the company currently predicts data centers will contribute to around 10% of the expected demand growth for gas through 2030, it might be a conservative estimate. Data centers could consume up to an additional 10 Bcf per day of gas by 2030 in an upside scenario.
With these new data centers driving demand for natural gas, Kinder Morgan has secured four large-scale gas pipeline expansion projects, a $5 billion investment that will transport over 5 Bcf (billion cubic feet) of gas per day. The Texas data center's proximity to Kinder Morgan's existing pipeline networks creates an opportunity for the company to capitalize on this trend, even if it faces intense competition.
As we enter an era of AI and data centers, marketers looking to capitalize on this surge can consider investing in pipeline companies like Kinder Morgan. With its expanding project portfolio, strategic position in the AI and data center market, and strong financial performance, Kinder Morgan is poised for significant future earnings growth.
Finance professionals might closely monitor the increases in natural gas demand due to AI data centers, as this trend could present investment opportunities in related sectors. In the context of this evolving landscape, intelligent investors might consider diversifying their portfolios by allocating funds towards energy companies, such as Kinder Morgan, that are directly benefiting from the rise in natural gas consumption.
