AI "Powers" Ahead
If it can...
2025 was all about the AI trade, with hyperscalers pledging hundreds of billions of dollars towards new data centers promising to nearly triple total U.S. data center capacity in order to accommodate for machine learning and training of AI powered models.
It also quickly became clear in 2025, that a major constraint for these data centers, would be power. Especially as the AI race quickly shifted from a battle between top companies to a battle between top countries…
But with power as a constraint, this is a battle we are surely to lose…
The market is often quick to realize these issues, it figured out that if the U.S. was going to be competitive in the AI race, it must first be able to produce the power needed to accommodate the demands of these new data centers.
The list goes on.
The returns for independent power producers and utilities are mind boggling, with most names going 4-6x in just 18 months.
The market is usually ahead of the curve.
But this was the obvious trade, and like we highlighted in our Regal-Rexnord piece, its often the periphery players in a trend that benefit the most, just like Comfort Systems, seeing their stock rise nearly 1,000% just by providing plumbing for the data centers, outperforming every stock that was actually providing the server stacks, chips and tech for the data centers.
So, in Krypton Research fashion, it is up to us to find what the hidden trade in this Power Theme is.
We know that the US needs to add more production, the market knows that too. We have seen alternative power producers soar as well, such as nuclear names OKLO 0.00%↑ and SMR 0.00%↑, the issue is not power generation, at least not from an investment perspective.
Valuations across the utilities landscape reflect the massive influx in investment that will be flowing to these companies, and its no secret that we will need more production.
So what are we missing here?
In today’s piece we will dive into the next bottleneck of the AI and power trade, one that is as obvious as the last, but only holds a few small players, players that will dominate returns in the coming years.
Lets dive in.