Talking Markets (Powering the AI revolution) with Tyler Rosenlicht (Cohen & Steers)

Tyler Rosenlicht · Cohen & Steers

Data-center reliability needs are pushing the system back toward traditional power and storage.

Data centers cannot afford to lose power, because an outage leaves an expensive shell with no economic value. This has pushed focus back toward traditional energy, which runs continuously, and alternatives are intermittent. The system is currently trading some cleanliness for reliability. The team argues that investment in alternative battery storage and other measures is needed to make the alternative side more reliable.

“Right now, it's let's trade off a little bit of cleanliness for reliability because that's what the economy is focused on. Let's reinvest and increase investments in alternative battery storage and other things to harden the alternative space.”at 5:31

Tyler Rosenlicht · Cohen & Steers

Grid and utility infrastructure investment is underappreciated and still very early; the team likes builders.

The capital needed for power generation and transmission for utilities, here and around the world, is immense. The team thinks the market still underappreciates this build-out. Electrification and growth are still in very early stages. The team likes the companies in that value chain, including those that build transmission lines, lay pipelines and build utility infrastructure.

“we do think the infrastructure build out in the energy system is still underappreciated. The amount of capital, CapEx, generation transmission required for utilities here and around the world is immense”at 8:32

Tyler Rosenlicht · Cohen & Steers

Global energy demand will keep rising; the world needs more of every energy form, not less.

Long-term energy demand is a three-factor model: population, economic growth, and energy intensity. Three or four years ago the team assumed energy efficiency would keep improving, but it has become the least comfortable of the three assumptions because of data centers, AI, electrification and reindustrialization. The team has upgraded its intensity forecast, so it now sees an 'energy addition world' where demand rises at least 1% a year from 2025 to 2050. Developed-world consumption of about seven units per person is expected to fall toward six, while the developing world's three billion people, at one unit per person, are expected to rise toward two. Alternatives will gain share, but the world needs to produce more of every form of energy.

“But when you put all three of them together, you saw, hey. The demand for energy was gonna rise a lot, at least 1% a year each year from 2025 to 2050.”at 2:21

Tyler Rosenlicht · Cohen & Steers

US natural gas is cheap, plentiful and baseload; the team likes pipelines, producers and exporters.

US natural gas is cheap and plentiful. It is baseload, cleaner than other traditional fuels, and backed by an existing pipeline system. Because of this, the team still likes natural gas, and it likes the full chain from midstream pipelines to gas producers and gas exporters. The team also expects natural gas to grow strongly in the energy mix, alongside alternatives and traditional sources.

“We still really like natural gas. Natural gas is cheap in The US. It's plentiful. It is baseload. It's cleaner than traditional forms of energy.”at 6:58

Tyler Rosenlicht · Cohen & Steers

Nuclear is in a renaissance with a large investment cycle; the team is very positive on the value chain.

Nuclear is clean and predictable. It runs 24/7/365 with very low variable cost, which is why it has featured in the conversation for the past three or four years. The team sees a nuclear renaissance that will take 15 to 20 years to play out, backed by a huge investment cycle already under way. The team calls the nuclear value chain well positioned, and it says the path will be non-linear. The stake reflects the team's active positioning in the group.

“Nuclear is clean. It's also very predictable. ... We really are excited about nuclear. Again, we think that we're in a nuclear renaissance. It's going take fifteen or twenty years, but there's a huge investment cycle behind us there.”at 6:58

Tyler Rosenlicht · Cohen & Steers

Canadian oil sands are underappreciated; their long reserve life will matter more as energy demand grows.

The team thinks the market is not paying enough attention to Canadian oil sands. Canadian oil producers hold roughly a hundred years of inventory. As the world accepts the energy-addition view, their ability to produce oil over the next 20 to 50 years will become increasingly important. The team sees this as an under-discussed source of long-term supply, which is why it holds the group.

“One that folks aren't talking about enough in our view is the Canadian oil sands. ... one of the nice things with Canadian oil producers is they have a hundred years of inventory behind their [backs].”at 7:35

Tyler Rosenlicht · Cohen & Steers

Europe's import dependence and energy-security push will speed its shift to wind and solar.

Europe imports oil and natural gas and wants to be less dependent on foreign suppliers. Tensions in the Middle East and the oil-price moves they cause make the case for domestic supply. The team thinks Europe will accelerate its shift to alternatives because wind and solar are sources it can harness on its own. Energy security will increasingly drive investment decisions and opportunities.

“Europe relies on imports of oil and natural gas. They wanna be less dependent on foreign suppliers. What we think that Europe is gonna do is... even go faster in the alternatives because, wind and solar are things that they can harness on their own.”at 8:14

Tyler Rosenlicht · Cohen & Steers

Local data-center moratoria are multiplying fast, making the sector politically charged and creating winners and losers.

Affordability and the costs of the energy build-out are now central issues, and voters are paying attention to utility bills and rate cases. The team points to rapid growth in local restrictions on data-center development: about 90 local moratoria in June, and now about 500 in the US. This is making data centers a more politically charged sector. The team expects the growing red tape and the affordability debate to create winners and losers, and it sees affordability driving the conversation for a long time.

“in June, there were like 90 local moratoria for data center developments. In The US, now there's 500. ... We think that's gonna drive winners and losers.”at 10:05