The White House's move to designate U.S. grid infrastructure as "essential to national defense" could supercharge demand for companies tied to transformers, transmission lines, and high-voltage equipment, setting up a potential rally across electrification-focused stocks and ETFs, according to Anthony Pompliano.
Electrification Push
In Sunday's post on X, Pompliano highlighted that transformers, transmission lines and conductors, substations, and high-voltage circuit breakers are the big tailwind for companies driving America's electrification push.
Last month, Amazon.com Inc (NASDAQ:AMZN) announced that it is developing a new device known internally as “Transformer” that aims to leverage artificial intelligence to streamline user experiences.
Where The Money Goes First
Rosanna Prestia framed the playbook as "Where the Money Goes First," arguing that "Money doesn't hit utilities first. She wrote, "The winners are suppliers, not just utilities."
Prestia put "transformers (massive shortage)" at the top of the winners list, alongside "high-voltage equipment" and "transmission buildout." She also highlighted "grid automation/software" and "copper/conductors" as parallel beneficiaries as utilities and developers push to modernize and expand capacity.
Stocks That May Benefit
The move would benefit equipment manufacturers and engineering firms at first glance, per Prestia. Quanta Services Inc. (NYSE:PWR) for transmission buildout, Eaton Corp. Plc (NYSE:ETN) for breakers, switchgear, power systems, Vertiv Holdings Co. (NYSE:VRT) for power and cooling solutions critical for data centers, GE Vernova Inc. (NYSE:GEV) for grid equipment, including transformers and Siemens Energy AG (OTC:SMERY) for global grid and energy infrastructure technology.
Goldman Sachs previously forecasted that global data center electricity consumption will surge by 220% from 2023 levels by 2030, primarily due to the expansion of artificial intelligence infrastructure, indicating a robust appetite for reliable power sources as investment flows toward essential components.
ETFs To Benefit
ETFs like First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (NASDAQ:GRID) and ALPS Electrification Infrastructure ETF (NASDAQ:ELFY) are poised to benefit from the White House's move.
GRID provides exposure to the companies primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector.
It tracks the Nasdaq Clean Edge Smart Grid Infrastructure Index and has $9.5 billion in assets under management (AUM). The ETF charges 0.56% in annual fees and trades about 727,000 shares a day on average.
Benzinga Edge Stock Rankings indicate GRID has a Momentum score in the 83rd percentile and maintains a strong price trend in the short, medium and long terms.
ELFY seeks to track publicly traded mid- and large-cap companies (minimum market cap of $5 billion) that are positioned to benefit from electrification. With an AUM of $164.1 million, it follows the Ladenburg Thalmann Electrification Infrastructure Index and trades in an average daily volume of 26,000 shares. It has an expense ratio of 0.50%.
Benzinga Edge Stock Rankings indicate ELFY has a Momentum score in the 81st percentile and maintains a strong price trend in the short, medium and long terms.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Miha Creative / Shutterstock
Login to comment