AI's Thirst for Power Can Be Tamed With Flexibility
Welcome to Energy Daily, our guide to the commodities markets powering the global economy. Today, reporter Josh Saul discusses the concept of making electricity demand flexible to meet artificial intelligence's needs.
US power demand has soared in recent years with the growth of artificial intelligence, the building of factories and the electrification of the economy. Some analysts liken this unexpected surge to the jump seen during World War II.
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This vertical — Communications Solutions — is 45% of Amphenol's business and growing rapidly, fueled by incredibly strong demand coming from broadband, mobile networks and data center interconnects. After the last earnings report, which Sean will detail below, Wall Street woke up to the fact that there's no AI without connections between the chips and the hardware, the servers and the electrical equipment, the architecture and the energy. Amphenol's products are involved at every stage of this. Best Stock Spotlight: Amphenol Corp (APH) On the list since: 12/16/2024 One-year price chart with moving averages, RSI: Sean — Amphenol has as pretty of a chart as you'll find. Below is a total return price chart over the past 5 years using a logarithmic scale (On a log scale, equal vertical distances represent equal percentage changes, so a move from $10 to $20 - a 100% gain - looks the same as a move from $100 to $200, it helps visualize longer term charts): The stock has seen some downtrends over the past 5 years, but its long-term trend is incredibly consistent - up and to the right. Looking at the stock on a weekly basis, buyers have tended to come in around the 50-week moving average. And if you're lucky enough to have a shot at the 200-week, investors are hammering the buy button. Every move toward the 200-week was followed up with heavy buying volume over the past 5 years: There are not many stocks that have shown this type of strength over long stretches of time. Going back to June of 2020 (5 years), this stock has spent 82% of its time above its 200-day moving average. 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The most significant growth driver was the IT datacom market, which represented 33% of sales and grew 134% organically year-over-year, with particular strength in artificial intelligence-related applications. (Earnings data via Quartr) AI is a massive driver for this company. The CEO had this to say on what's going on with AI: "It is a revolution that creates for our industry a disproportionate opportunity because of the unique nature of the architecture and the intensity of the interconnect solutions that are associated with that architecture. And so when you stack that all together, it's a great revolution. It's a more interconnected intensive revolution, and we've taken more than our fair share of that. The result has been that our IT datacom business has grown very robustly." This stock has a great story, strong technicals, and exciting fundamentals. What more could you ask for? Risk Management: Josh — It's tempting to look at the chart of Amphenol and say "Well, I guess I missed it." And, of course, you're certainly not looking at a ground floor buy-in here. But it's been my experience that more stock market opportunities have been lost by people thinking they already missed their chance than for any other reason. If you've been investing for a while, it's likely you already have some of your own war stories of this variety — Tesla, Bitcoin, Netflix, Nvidia, Broadcom, Palantir, etc. It's really hard to buy a stock that's just doubled. It's even harder to imagine a doubling happening again. Having a solid risk management plan in place prior to entry can help investors over this mental hurdle. APH is currently in the process of consolidating its huge post-earnings rally. RSI has cooled off to just below 70 and that's a good first step. I'd be watching for a price dip into the high $80s, which would be a retest of the most recent breakout area before entering the position. The risk of waiting for that lower entry is you may not get the chance. It happens. Traders will want to keep an eye on the rising 50-day, currently $81.50, as a place to lighten up or exit. Investors will want to give this situation the benefit of the doubt and a little bit of a longer leash. There's a gap below $71, I like that level as a stop as it would tell me the sellers have taken control and something may have changed with the story. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. 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