Photographer: Angel Garcia\/Bloomberg <\/p>\n
(Bloomberg) — While some corners of\u00a0energy markets have looked pretty frothy of late, one segment has Wall Street betting it won\u2019t get trapped in a bubble: grid tech stocks.<\/p>\n
Despite sector-wide gains of some 30% this year, grid tech stocks remain an attractive target, according to Steve Tusa, managing director and senior equity analyst at JPMorgan Chase & Co. Grid tech encompasses a range of hardware makers and software developers as well as utility-scale battery installers. Tusa says investors would be well advised to take advantage of small dips in share prices.<\/p>\n
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\u201cAny pullback is a buying opportunity at this stage,\u201d Tusa said.<\/p>\n
Take Vertiv Holdings Co., which provides microgrid and energy storage solutions to data centers. While the company’s stock price is up around 60% this year and is trading at a \u201cpretty significant premium\u201d to the S&P, their growth \u201cjustifies\u201d the premium, he said.<\/p>\n
Other grid tech stocks\u00a0have also seen large gains this year, mirroring the\u00a0data center boom. Korean transformer manufacturers Hyosung Heavy Industries Corp. and LS Electric Co. have led those moves, soaring roughly 400% and 230%, respectively, this year. In the US, inverter system maker SolarEdge Technologies Inc.\u2019s stock has more than doubled in value, while engineering firm Willdan Group Inc. is trading just off record highs.<\/p>\n
\u201cIt\u2019s not just about AI,\u201d said Tim Chan, head of sustainability research for\u00a0Asia Pacific ex-Japan at Morgan Stanley. \u201cEnergy demand as a whole is growing.\u201d<\/p>\n
At Fidelity International, the view is that there\u2019s now \u201ca very long, structural change,\u201d\u00a0 says Gabriel-Wilson Otto, Fidelity\u2019s head of sustainable investing strategy. That change is being driven by electrification and\u00a0the growing\u00a0power needs of Asian economies, not least to gain energy security, he says.<\/p>\n
Non-AI factors are \u201cplaying a larger role\u201d in driving up energy demand in developing economies, which should support grid tech stocks globally, he said. Upgrades to the aging grid are also badly needed as climate change brews up more extreme weather.<\/p>\n
Global grid spending is set to rise by 16% this year to $479 billion, according to a\u00a0recent BloombergNEF report, and is expected to climb to $577 billion by 2027. Data center energy demand is also projected to more than double\u00a0by the end of the decade, according to the International Energy Agency, with every new power plant needing to be hooked up to the grid.<\/p>\n
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The Nasdaq OMX Clean Edge Smart Grid Infrastructure Index, a main gauge tracking companies\u00a0with business exposure to grid infrastructure,\u00a0 has surged about 30% this year, outperforming\u00a0other major stock indices. The Nasdaq 100, which includes Nvidia Corp., Apple Inc. and Microsoft Corp., is up about 22% in the period.\u00a0The grid index is trading at 21 times forward earnings, which makes it cheaper than the Nasdaq 100.<\/p>\n
To be sure, grid tech stocks also slipped when AI bubble fears gripped markets last month. And not everyone is convinced the sector will\u00a0sail through a possible\u00a0AI slowdown.<\/p>\n
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\u201cGrid as a theme is still a structural winner into 2026,\u201d\u00a0said Lisa Audet, founder and chief investment officer of Tall Trees Capital Management LP, a US-based boutique hedge fund specializing in the energy transition. But\u00a0a lot of good news has already been factored into this year\u2019s stock rally, she said. Investors will have to \u201cbe very picky around valuation and cyclicality,\u201d she warned.<\/p>\n
Many grid upgrades will likely require cooperation with utilities, or at least data from these regulated monopolies, which could slow or block investments. Some states are also increasing scrutiny as customer bills increase, which could hinder the deployment of grid technologies in some areas because they are deemed too risky. The pace of adoption will vary by utility, state, regional grid operator and broader regulatory construct of each area.<\/p>\n
Hedge funds reporting to US-based data provider Hazeltree continue to be net bullish on\u00a0the Nasdaq grid index. Long bets exceeded shorts on\u00a066% of index members at the end of September, up from 59% a month ago, the data showed. Hazeltree tracks positions on 108 of the 113 index constituents, and about 600 funds report their positions voluntarily to the platform.<\/p>\n
\u201cGrid infrastructure isn\u2019t primarily an AI story; you could think of it as a chickens are finally coming home to roost story,\u201d said Garvin Jabusch, chief investment officer at Green Alpha Advisors. The Nasdaq grid index has been on the rise for three consecutive years since 2023, though previous gains were more modest. As the AI boom put grid infrastructure in the spotlight, \u201cthe market is finally pricing in what should have been obvious for a long time,\u201d Jabusch said.<\/p>\n
That\u2019s particularly true in the US and Europe, where large parts of the grid were\u00a0built decades ago, when electricity was generated by fossil fuel-fired power plants and flowed from utilities to consumers. Today, renewables are on the rise\u00a0and home batteries paired with rooftop solar can send electricity back to the grid, all of which demand\u00a021st-century upgrades from transformers to transmission lines.<\/p>\n
Venture capitalists are also seeing opportunity in the sector. \u201cWe didn\u2019t need to bank on data centers being the growth engine,\u201d said Evan Caron, chief investment officer at Montauk Capital, which backs early-stage energy and grid startups. He says the data center buildout is \u201cgasoline for a fire that is already burning.\u201d<\/p>\n
Alex Darden, who leads infrastructure investment in the Americas for global private-markets firm EQT Partners Inc., said that even if there were some hype around AI, the list of tailwinds combined with the fact that grid infrastructure is historically under-invested is creating \u201csignificant opportunities.\u201d<\/p>\n
And \u201cit\u2019s not just a 2026 opportunity,\u201d Darden said. \u201cThis is a multi-year, probably multi-decade investment cycle that we\u2019re entering now.\u201d<\/p>\n
\u00a0<\/p>\n
–With assistance from Subrat Patnaik.<\/p>\n
(Adds BI reference in final paragraphs.)<\/p>\n
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\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"Photographer: Angel Garcia\/Bloomberg (Bloomberg) — While some corners of\u00a0energy markets have looked pretty frothy of late, one segment…\n","protected":false},"author":2,"featured_media":173966,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,902,8558,77999,43009,87906,55281,111,139,69,45255,145],"class_list":{"0":"post-173965","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-bloomberg","12":"tag-data-centers","13":"tag-energy-demand","14":"tag-energy-markets","15":"tag-fidelity-international","16":"tag-grid","17":"tag-new-zealand","18":"tag-newzealand","19":"tag-nz","20":"tag-tech-stocks","21":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/173965","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=173965"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/173965\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/173966"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=173965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=173965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=173965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}