In today’s email:

  • CrowdStrike outage: Software issues hit planes, banks, and the London Stock Exchange.

  • Ford giving up on EVs?: Auto giant reallocates money back to gas-powered vehicles.

  • An urgent AI event: Altimetry founder Joel Litman predicts an AI event that will lead to “panic.”

  • AI tide lifts all boats: Tech isn’t the only sector seeing an AI boost.

Starting with the “world’s largest IT outage”…

That was the headline on CNBC this morning. Early Friday, cybersecurity giant CrowdStrike (CRWD) had an issue with its latest software update. The problem only impacted Microsoft (MSFT) users but had a wide-ranging impact on businesses across the globe.

Several airlines halted flights early in the morning – including American (AAL), Delta (DAL), and United (UAL). This led to more than 10,000 delays and cancelations worldwide.

Public transit, healthcare clinics, and financial services also took a hit from this outage.

And even the London Stock Exchange was affected – with its news service for market-moving announcements going dark.

It’s too early to know the full impact, but CrowdStrike’s CEO was quick to come out and say that the problems were not caused by a cyberattack or posed a security threat. But investors aren’t sticking around to find out…

CrowdStrike shares plummeted more than 10% in pre-market trading, while Microsoft shares fell more than 1%. In the bigger picture, these moves represent more of a pullback than a bear market – CrowdStrike is still up 20% this year, and Microsoft is up 16% year to date.

Aside from CrowdStrike, the outage didn’t have a massive impact on the rest of the markets. All the major U.S. indices were down less than 1% in Friday morning trading.

Reversing course on EVs…

For a while now, electric vehicles (EVs) have been a big focus for the auto industry. Auto giants like Ford (F), General Motors (GM), and Volkswagen (BWAGY) have poured billions of dollars into EV plants.

As our colleague and Altimetry founder Joel Litman explained in an issue of High Alpha newsletter last month, the investment isn’t just being driven by a change in consumer preferences. From Joel…

In 2022, California introduced a plan to wind down the sale of [international combustion engine, or ICE] vehicles. It was part of an effort to reduce carbon emissions. The state will begin banning new gas vehicles starting with 2026 models… and aims to ban the sale of all ICE cars in 2035.

Eight other states have now followed California’s lead. But Joel believes the death of traditional vehicles is being overblown. And a recent decision from Ford is evidence of that…

Ford just announced a $3 billion investment in a truck plant in Canada. Now usually, that’s not a big deal. But this is noteworthy given that Ford previously had plans to turn the truck plant into an EV manufacturing hub. Now, they are delaying the production of EVs and refocusing on producing gas-powered versions of their flagship trucks.

We’ve also seen Volkswagen reverse its own EV plans and shift some investment back to traditional vehicles. Like Joel said, the death of the traditional vehicle has been overstated. And automakers’ actions are showing us EVs aren’t taking over just yet.

A big prediction…

Yesterday, Joel went live with a special presentation where he gave a major artificial intelligence (AI) stock recommendation. It’s not one you may think of, like Tesla (TSLA) or Nvidia (NVDA).

In the coming weeks, Joel expects one AI company to make a huge announcement. As he said in yesterday’s event…

The patents have been filed… the CEO of the company behind it has already briefed politicians on it… and recently claimed it’s “in the bag.” And it could bring AI mania to a sudden and dramatic conclusion.

In short, Joel believes we’re at the point of an AI “arms race” between all the big players. And that will spark a market “panic” creating big winners – and losers – in stocks, Joel says.

AI is making a wave outside of tech…

In today’s MarketWise Daily, we’re sharing an essay our colleague Eric Fry wrote in the July 10 issue of the Smart Money free e-letter. AI is on every investor’s mind these days, and many of them are rushing into the hot tech stocks to take advantage.

But as Eric explains, AI will reach much further than the tech industry. Just look at how much electricity AI is expected to consume. As he wrote…

By 2030, overall electricity demand is projected to surge up to 20%. AI data centers alone are expected to consume an additional 323 terawatt hours of electricity demand; that’s seven times greater than New York City’s 48 terawatt hours of electricity demand.

That’s going to be great news for energy providers of all kinds – oil, gas, renewables, you name it. Over to Eric…

AI Will Generate Gains for All Kinds of Energy Stocks

Hello, Reader.

Amidst the buzz and bright lights of the stock market’s obsession with artificial intelligence, many investors overlook a crucial factor…

The energy sector plays a pivotal role in powering this digital revolution.

And the actions of tech giant Alphabet Inc. (GOOGL) showcase this interplay.

The tech giant is investing billions of dollars to build new data centers, which are critical for AI training and development. As noted in a recent environmental report, the company’s AI-driven success accompanied a 17% increase in total data center electricity consumption in 2023. Furthermore, Alphabet’s carbon emissions rose 13% since last year and surged 50% since 2019.

That’s just one (admittedly very large) company.

The spike in electricity demand due to AI will only continue to increase, especially as tech giants like Google pour their resources into creating newer and bigger data centers.

So, in today’s Smart Money, let’s dig into how this energy consumption is good news for both renewables and gas producers… and their investors.

A Natural Alliance

Last year, global investment in all forms of energy hit a record-high $2.8 trillion, according to the International Energy Agency (IEA). Of that total, fossil fuel investments accounted for about $1 trillion, while renewable energy investments accounted for the remaining $1.8 trillion.

Even though oil and gas investment trailed behind renewables, it is not going away. In fact, Alphabet’s recent carbon emissions numbers underscore the persistent and growing role of fossil fuels in powering our digital future.

By 2030, overall electricity demand is projected to surge up to 20%. AI data centers alone are expected to consume an additional 323 terawatt hours of electricity demand; that’s seven times greater than New York City’s 48 terawatt hours of electricity demand.

This massive uptick is likely going to ignite a natural gas boom.

Wells Fargo projects a seismic shift in gas consumption driven by AI’s significant energy needs. By 2030, daily gas demand could surge by a staggering 10 billion cubic feet (bcf). To put this in perspective, that would represent a 28% jump from the current 35 bcf/day used for U.S. electricity generation. This would boost the nation’s total gas consumption by 10%, pushing it well beyond the current 100 bcf/day mark.

Additionally, according to the newest Global Energy Perspective by the McKinsey & Co. research group, global natural gas demand is all-but-certain to grow for the next 15 years, and perhaps for as long as the next 30 years. Crude oil demand is also on track to continue growing for at least a decade.

A Sustainable Solution

Natural gas isn’t the only side of the energy sector getting a boost from AI demand.

According to a Goldman Sachs report released in April, the surge in demand from AI and data centers will be met by a mix of energy sources. While natural gas is expected to fulfill 60% of this increased demand, renewables would cover the remaining 40%.

However, analysts do warn that getting renewables up and running pretty much immediately faces hurdles. Wells Fargo analyst Roger Reed highlighted a key challenge: the time-consuming process of constructing power lines to transport green energy to data centers.

This infrastructure lag means that while renewables are part of the long-term solution for energy demand, they can’t single-handedly meet the surging demand in the short term.

However, the outlook remains a positive one for renewables. Judging from the grim share-price trajectories of “green” stocks, one might assume that renewable energy deployments around the globe are falling. But that’s not the case.

Last year, global solar photovoltaic deployments skyrocketed 85% year-over-year to a record-high 420 gigawatts (GW) of capacity. Combined with 2022’s deployment of 228 GW and 2021’s 168 GW, the world installed 816 GW of solar capacity during the last three years – or more than double the entire capacity the world had installed before 2020.

A rapid turnaround is unlikely, but a gradual turnaround is probably a good bet.

Renewable energy stocks have suffered such relentless selling pressure for the last three years that they reflect only doom and gloom. Therefore, many stocks in the sector could soar, as they begin to convert their profit potential into genuine profit growth.

The AI story still has plenty of ground to cover. Even with some of the huge gains we’ve seen in semiconductor and software stocks, this trend is far from over. We’ll continue covering the big headlines and MarketWise editors’ and analysts’ thoughts on the trends in MarketWise Daily.

But as Joel said, investors must focus on picking the right stocks within the trend.