As promised during his campaign, President Donald Trump declared a national energy emergency following his inauguration and signed several executive orders aimed at boosting domestic fossil fuel production while reversing many of the clean energy policies from the Biden era.
Trump, along with key cabinet members such as Doug Burgum, the newly appointed Secretary of the Interior, emphasized that increasing electricity output is critical for the U.S. to maintain its competitive edge in the global AI race. To achieve this goal, the Trump administration believes the U.S. must rely on a consistent, always-on energy supply, rather than intermittent renewable sources. Chris Wright, the new Secretary of Energy, stated during his confirmation hearing that his first priority would be enhancing domestic energy production, particularly through expanding LNG and nuclear power.
Electricity demand from data centers has indeed taken utilities by storm in recent months. After years of slow growth, grid operators in Texas and Virginia – two states with a high concentration of data centers – have projected power demand increases of 80% and 30%, respectively, between 2024 and 2034. In certain areas, concerns are already being raised about the impact of these data centers on local energy supply, particularly for residents.
While the administration’s immediate focus has been on increasing fossil fuel production, it is widely anticipated that President Trump will seek to enhance U.S. electrical infrastructure. This could include easing permitting processes and accelerating the approval of new power plants, as well as the reopening of dormant nuclear plants.
This policy shift hints at a massive wave of capex in power generation. However, transmission and distribution (T&D) infrastructure – such as high-voltage cables and transformers – will also need significant investment. As demand for electricity rises, the existing T&D infrastructure is already facing strain. According to various studies, including reports from the Department of Energy, the U.S. and other countries urgently need to double transmission capacity to improve reliability, reduce congestion, and accommodate growing energy sources. Some states, like Texas, have already taken steps in this direction. Texas, for instance, has approved an electric reliability plan for the Permian Basin, where energy demand from both the oil and gas sector and data centers is expected to soar. This plan, which includes the construction of 765-kV transmission lines, could represent an investment of nearly $15 billion.
Overall, these policy changes are expected to drive strong revenue growth for industrial equipment companies active in power generation and transmission/distribution – sectors that make up the core of our Powering AI portfolio. The long lead times typical in the industry (e.g., for transformers) suggest that upcoming orders will come with favorable pricing and margin conditions, providing strong visibility on earnings growth over the next few years.