Investing.com -- UBS strategists see a strong investment case for power and resources as electrification accelerates across industries.
"CIO estimates the electrification of the global economy will require around $3 trillion in annual investments by 2030,” UBS strategists including Matthew Carter said in a note.
This surge is driven by increasing demand from artificial intelligence (AI) data centers, electric vehicles (EVs), and industrial electrification.
Electricity demand is expected to grow at an annual rate of 3.4% from 2024 to 2026, significantly outpacing the 1.4% average growth over the past decade, according to the International Energy Agency (IEA).
UBS believes this structural shift creates multiple investment opportunities across the electrification value chain. The firm’s "Power and resources" portfolio includes exposure to companies engaged in power generation, grid resilience, and essential materials needed for energy storage and electrical infrastructure.
The AI boom is a major driver of this trend. According to UBS, big tech companies are expected to pour more than $250 billion in capital expenditures (capex) to expand data center capacity by 2025, with leading firms projecting a year-over-year growth rate of more than 45%.
AI model training remains highly energy-intensive, and UBS sees broader AI adoption reinforcing demand for power, benefiting firms in the sector.
Key raw materials also stand to gain from this trend. "The demand for essential materials such as copper, lithium, and aluminum is set to rise thanks to electrification and energy transition,” strategists noted.
The IEA projects global demand for certain metals could increase nearly tenfold by 2050. Copper demand alone could rise by an additional 100,000 metric tons annually from data centers.
Supply bottlenecks and geopolitical constraints may further support commodity prices, strengthening the investment case for companies involved in raw material extraction and processing.
UBS sees opportunities not just in public markets but also in private equity and infrastructure investments. "For risk-tolerant investors, we also like private equity and infrastructure opportunities supporting data center growth and energy transition infrastructure."
In sum, AI power usage, industrial electrification, and decarbonization are expected to be key drivers for a surge in electricity demand.
UBS advises investors to consider “diversified investing in stocks across the electrical equipment, materials, and utilities sectors, as well as private markets investments in data center and energy transition infrastructure."