Not sure if we're allowed to copy articles from the AFR but I found this one interesting. Link here: https://www.afr.com/chanticleer/why-this-asx-dinosaur-may-be-a-smart-ai-play-20241010-p5khf2
Everyone is hunting for the next ASX artificial intelligence play.
Is it NextDC? Is it Goodman Group? Is it David Di Pilla’s latest data centre play?
Or could it be … um … AGL Energy?
The question of how to power the AI revolution is a global one. In the data centre capital of America – the state of Virginia – data centres already consume 26 per cent of the state’s power, while Ireland has a moratorium on new data centres in the Dublin area until 2028 due to concerns about the stability of its grid.
AGL Energy’s Damien Nicks has overseen an impressive share price gain this year. David Rowe
Morgan Stanley estimates that data centre power demand will grow at a compound annual growth rate of about 20 per cent between 2023 and 2027. This is not all about generative AI; the economy-wide shift to cloud computing will also underpin demand.
View AGL related articles The result is that global demand for power from data centres will double over that period, from 2 per cent to 4 per cent. In Australia, which Morgan Stanley strategist Simon Clark believes could become a top-five data centre hub, power demand from the sector is tipped to rise from 5 per cent at present to about 8 per cent by 2030.
“While this is a small proportion of the grid at face value, this is in the context of energy demand that has not grown in a decade,” Clark says.
Notably, there is already evidence of how the rise of data centres is changing the way the grid is used, with Morgan Stanley noting load factors at night are now higher than at any time in history.
And it’s this growth in energy loads and volumes that helps underpin Morgan Stanley’s bull case for AGL, which suggests the stock can rise to $16.96, a gain of 44 per cent from its current level.
The logic is simple. Material price spikes in recent years, despite overall power demand remaining below 2 per cent, have underscored the constraints on the grid. Data centre power consumption induces more demand on the grid, and stronger prices. But AGL can also be a beneficiary from energy price volatility, as it deploys battery storage at periods of higher prices.
AGL chief executive Damien Nicks, who has overseen a share price rise of 20 per cent year to date, is understood to have fielded plenty of investor questions about how it’s preparing for the data centre boom. Of particular interest among shareholders is the potential for AGL’s Hunter Energy Hub on the site of the old Liddell power station to service data centres, given its access to both power and water.
The potential for data centres to play a role in demand-side management is also something AGL is thinking through as it chews over the implications of growth in this sector.
We’re in the very early stages of the AI revolution and the data centre boom, so there is time to plan for the growth that’s coming. Of course, Australia’s energy transition progress suggests policymakers and industry will do none of that required planning, and just try to muddle through.
That’s bad for the country, but it could well create the sort of volatility in energy markets that AGL can profit from.