From the studio

Podcast: CIO's Wayne, Jon and Teck on the US shutdown, FX, and gold (13 min)
Podcast: CIO's Dirk Effenberger on managing geopolitical risks (10 min)

Thought of the day

The latest round of AI capital spending is underpinning demand for electricity generation. US utility operator PG&E this week is the latest power sector company to announce major grid upgrades and transmission projects, pledging USD 73bn in new spending by 2030 to meet the needs of data centers and AI-driven demand. On Monday, Vistra Corp. announced a 20-year contract to sell 1,200 megawatts of power from its Comanche Peak nuclear plant in Texas to a large unnamed customer (likely a data center). Nationwide, power consumption is forecast to reach record highs in 2025 and 2026, according to the US Energy Information Administration, as data center developers face mounting grid constraints.

In response, the US energy secretary said the government would intervene via emergency powers to delay the retirement of most coal-fired power plants and to accelerate the reopening of nuclear plants. These moves are part of a broader strategy to boost energy output, including regulatory reforms to speed up nuclear permitting and efforts to expand backup generation. The resulting increase in power sector spending is in line with our forecasts for USD 3tr in annual investment across power generation, energy storage, grid infrastructure, and data centers by 2030, backed by strong commercial customer demand to secure capacity for new projects.

Despite these investments and policy shifts, we believe many investors are underestimating both the scale and the durability of the electrification opportunity:

Strong order books and backlogs signal sustained demand. Utilities and electrical equipment firms are reporting record order backlogs, supported by incremental growth in the pipeline of data center plans. Channel checks suggest commercial customers are eager to secure power and equipment for their projects as quickly as possible. Meanwhile, utility companies' guidance suggests a healthy pipeline of power contracts—either already signed, in advanced discussion, or expected to materialize soon.

Critical minerals and resource nationalism add to tailwinds. Rising tariffs and resource protection are boosting the value of companies in the power and resources supply chain. We have observed a renewed focus on the importance of critical minerals, illustrated by rising resource nationalism and the implementation of protective trade measures. This trend is supporting higher valuations and stronger fundamentals for companies involved in the electrification value chain, in our view.

Valuation premiums look justified by superior earnings per share (EPS) growth. Our favored electrification stocks offer significantly higher potential EPS growth—10 percentage points in 2025 and 7 percentage points in 2026—over global equities (MSCI ACWI Index), according to Factset consensus. Despite their modestly higher valuations compared to the wider market, we think these companies offer robust risk-adjusted return prospects.

So we retain our high conviction for durable organic growth across the power and resources sector on the back of AI-driven demand, continued electrification, and solid policy support. We recommend focusing on quality companies with strong infrastructure pipelines, proven execution, and the flexibility to adjust operations as market conditions evolve. While the opportunity is substantial, investors should remain mindful of regulatory and execution risks, particularly around legacy asset upgrades and permitting, though we see these as manageable within a diversified approach.