Artificial intelligence (AI) is a powerful tool, and it's likely to change the world in interesting, if not incredible, ways. But AI doesn't exist in a vacuum. The hardware that supports it needs to be housed and powered. The infrastructure buildout to do those two things is going to be massive, and it will be hard for one specific sector to keep up: utilities. But Bloom Energy(NYSE: BE) is ready to step into the gap. Here's what you need to know.
Artificial intelligence requires a lot of power
Artificial intelligence systems are basically just high-end computers running powerful software. Those computers -- servers -- are housed in data centers and require the lifeblood of electricity, both to power them and to keep them cool. If you don't have a serious amount of electricity to dedicate to those needs, you can't have an AI data center. This creates a problem for the AI industry.
Image source: Getty Images.
Electricity demand for AI is projected to grow by 300% over the next decade. That kind of growth will be a boon for electric utilities, of course. But there's a problem that must be addressed, because AI companies want to deploy new processing power ASAP, and utilities have to do a lot of work to provide the electricity required. Notably, regulated utilities must first get government permission to spend money on new power plants, lines, and infrastructure, and then they actually have to build them. That all takes a considerable amount of time.
So the benefit for utilities from all of this is likely to be a decade of strong growth. In fact, management teams at many utilities are happily talking about the step change in electricity demand that is taking place now. Even more long-term demand is expected to come from the shift toward wider use of electric vehicles: The amount of electricity drawn by EVs is expected to increase by 9,000% between now and 2050. That's a longer and more manageable time frame for a utility, but it just adds to the need for speed.
Bloom Energy has a solution for now
There's a clear opportunity for long-term growth for utilities, but what are AI companies supposed to do if they need more power now? Bloom Energy can dramatically increase the rate at which a company can get power. This is because Bloom Energy makes hydrogen fuel cells that are built in a factory and can easily be placed wherever they are needed.
Essentially, a data center can be built with Bloom Energy power cells and hit the ground running. When the utility finally gets around to building out the durable energy infrastructure to provide power to the facility, those power cells can be moved to another site where extra current is required. Bloom Energy started 2025 with a $2.5 billion product backlog, so it is seeing plenty of demand. But each of the power cells it builds also generates a service contract, which is why it has an even larger $9 billion service backlog.
Notably, it recently inked a deal with American Electric Power(NASDAQ: AEP) to provide 100 megawatts worth of fuel cells over the next decade. The agreement is specifically designed to help support the data center demand that AEP expects. In other words, this is all happening right now, but the benefits for Bloom Energy will be long term thanks to the service contracts its product sales generate. It is holding talks on deals with other utilities along the same lines.
Bloom Energy is inching closer to sustainable profits
The big problem with Bloom Energy is that it is still something of an upstart in the power sector, and it hasn't reached a point where it is sustainably profitable. For those reasons, conservative investors might want to take a pass on the stock. However, for more aggressive investors, it seems like Bloom Energy is positioned extremely well to provide a growing industry (AI) with what it needs (power) in a timely fashion (NOW!). That should help to speed Bloom Energy down the path toward more sustainable profits.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
