The Play is the Flow

The Play is the Flow

The AI buildout has a power problem. Data centers need electricity that is firm, always on, and available now. Solar and wind can't ramp fast enough, and can experience outages. Nuclear takes a decade to permit and build. Which leaves natural gas.

Goldman Sachs estimates 60% of new data center power capacity will come from natural gas. The IEA puts it at over 40% of current U.S. data center electricity already. And the demand is accelerating.

Microsoft and Chevron entered an exclusivity agreement on a $7 billion gas-fired power plant in West Texas, designed to co-locate with an AI data center campus. Meta funded seven new natural gas plants through Entergy to power its Louisiana data center, now scaled to over 7 gigawatts across 10 gas-fired facilities.

These aren't energy companies making bets on tech. These are tech companies building energy infrastructure from scratch because the grid can't keep up.

The chart below shows what that demand has done to the companies that move the gas.

Pipeline infrastructure, represented here by the MLPX ETF, is up nearly 65% over the past two years. The S&P 500 is up about 29%.

The story here isn't the price of natural gas, it's the volume flowing through the pipes. The hyperscalers need the gas to get from the well to the power plant, and the pipeline operators is how that happens.

Until next week,

Jacob

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