The Iran Conflict Briefly Sent Oil Past $115. Here's 1 Way It's Quietly Reshaping the AI Trade.
Key Points
Fossil fuel pricing is rising and volatile.
Certain growth stocks should benefit from the shift.
Oil prices surged last week as geopolitical tensions in Iran and the surrounding regions continued to flare. In recent trading days, oil prices have reverted sharply, sliding from a temporary high of $115 per barrel on March 9 to around $80 per barrel today. Still, oil prices remain roughly 40% higher since the year began.
What do volatile, rising oil prices have to do with artificial intelligence (AI) stocks? There's a sneaky angle tech investors should be aware of.
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Many AI data centers still rely on fossil fuels
It's not just oil prices that are going up. Natural gas prices are also up more than 16% since the year began. That's a challenge when you consider that fossil fuels still supply data centers with around 60% of their power need per data from the International Energy Agency (IEA). Renewables supply around 27% of the required electricity, with nuclear contributing 15%.
Image source: Getty Images.
With fossil fuel prices on the rise -- or at least demonstrating high levels of volatility -- the global data center build-out to support the AI industry's rapidly growing compute needs now faces an additional hurdle. This is likely good news for companies like Oklo (NYSE: OKLO) and NuScale Power (NYSE: SMR), which are developing smaller, modular nuclear reactors that can help data centers relieve themselves of this price uncertainty. Oklo's business strategy is specifically geared toward supplying AI-focused data centers with reliable base load power that is largely sheltered from swings in fossil fuel prices.
It's just another piece of the puzzle that could impact the scale and pace of the global data center build-out. But rising energy prices should put a greater spotlight on companies looking to supply this build-out with a clean, reliable, power supply with stable pricing.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.