If you’ve read any market news lately, you’ve likely seen OpenAI all over the headlines. First, a $100 billion investment from NVIDIA. Then, 5 new data centers through partnerships with Oracle and SoftBank, which are part of a larger $500 billion initiative. The key takeaway? Massive amounts of capital are flowing into the AI race.

Of course, AI investments are not new, even if the magnitude of each investment seems to rise with each announcement. The influx of capital begs the question, “how can investors take advantage of the AI race when most technology stocks are already overvalued?”

Finding an AI stock that isn’t already overvalued is extremely difficult in today’s market. Difficult, but not impossible.

To find value in the industry, one must look at the infrastructure behind AI. Behind the flash and hype sit massive, power-hungry data centers that require enormous amounts of energy.

Our Long Idea this week is a company that’s well positioned to benefit from the AI data center driven energy demand. The company has industry leading profitability, multiple development agreements in place, and its stock is cheap, unlike most AI tech stocks.

Below, we present a large excerpt from our latest Long Idea report published this week, available to Pro and Institutional members. You can buy the full report a la carte here.

We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.

This stock offers favorable Risk/Reward based on the company’s:

  • position to benefit from rising natural gas and steady oil production,
  • expanded capacity while maintaining profitability,
  • quality yield supported by strong cash flows,
  • superior profitability compared to peers, and
  • cheap valuation.

You need a Professional Membership or higher to view all the content on this page.

Already a member?

Learn more about our research here.

Data Centers Drive Huge Energy Demand

Nvidia (NVDA) recently announced a $100 billion investment in OpenAI to help it build data centers to deploy at least 10 gigawatts of NVIDIA’s systems for OpenAI’s AI infrastructure.

What does a deal this big mean for energy consumption? Brian Sullivan of CNBC notes 10 gigawatts is equal to the power generated by:

  • 2.5 new nuclear power plants, or
  • 15 new giant natural gas plants, or
  • 2,700 wind turbines.

This partnership between Nvidia and OpenAI is just one of many examples of AI and data centers driving huge energy demand.

McKinsey projects that by 2030, worldwide data centers will require $6.7 trillion in capital expenditures just to keep pace with the demand for compute power. The International Energy Agency (IEA) projects electricity demand from data centers will more than double by 2030, to ~945 terawatt-hours (TWh), which is slightly more than the entire electricity consumption of Japan.

LNG Exports: Another Driver of Natural Gas Demand

Liquefied natural gas (LNG) exports present another large driver of demand for U.S. natural gas production. LNG provides transportation advantages through the process of liquefying natural gas, which reduces it to 1/600th of its original volume.

U.S. LNG exports have nearly quadrupled over the last five years, and the Energy Information Administration (EIA) forecasts U.S. LNG exports will increase 36% from 2024 to 2026.

Furthermore, the EIA projects U.S. monthly natural gas production to grow from 112.9 billion cubic foot (Bcf) in December 2024 to 115.1 Bcf in December 2026. See Figure 1.

Figure 1: U.S. Monthly Natural Gas Production: 2010 – 2026

Source: EIA

Special Business Model

This company generates revenue by leasing its mineral and royalty interests in oil and gas properties across the U.S. The company does not bear the costs or operational risks associated with drilling or maintaining wells. Instead, it leases its rights to exploration and production (E&P) companies, which assume the associated expenses and risks.

This business model allows the company to benefit from rising natural gas and oil production in a much more stable and predictable manner compared to E&P companies.

Profits Trending Up in the Long-Term

While profits are down from record 2022 levels, the company continues to generate strong Core Earnings and free cash flow (more on that later). The company generated $245 million in Core Earnings in the TTM ended 2Q25, which is higher than any other year in our model except 2022 and 2023.

The company has grown revenue by 1% compounded annually and Core Earnings by 7% compounded annually since 2015. See Figure 2.

More recently, the company’s net operating profit after-tax (NOPAT) margin improved from 48% in 2019 to 64% in the TTM, and in turn its return on invested capital (ROIC) improved from 11% to 17% over the same time.

Figure 2: Revenue and Core Earnings: 2015 – TTM

Sources: New Constructs, LLC and company filings

…there’s much more in the full report. You can buy the report a la carte here.

Or, become a Professional or Institutional member – they get all Long Idea reports.

I’ll keep sending information on quality sectors, industries, or specific companies until you’re ready to start your membership, but know that we expect this pick to outperform.

Interested in starting your membership to get access to all our Long Ideas? Get more details here.