If you were surprised to see Microsoft (MSFT) executive Brad Smith emerging this week as the new champion of “AI-First Community Infrastructure,” consider this: “At least 25 data center projects were canceled last year following local opposition in the United States,” according to Heatmap’s analysis of the data. Plus, they note, “data center cancellations due to local opposition have quadrupled in just the past 12 months.”
Harnessing Soft Power for AI
So it’s no surprise that Microsoft, as a major artificial intelligence (AI) hyperscaler, is looking to harness what Heatmap describes as “the raw power of a local zoning board.” The company recently identified itself as the prospective owner of what’s become a hotly contested 237-acre lot in Michigan’s Lowell Charter Township, with Microsoft responding to widespread public pushback in the form of a letter stating, “We asked the seller to pause the rezone process so that we could spend time with the community early this year and share more about our potential long-term plans before we proceed.”
In other words, “Get to know us, and we think you’ll like us… and our data center.” To that end, Microsoft’s 5-point pitch highlights their commitment to job creation, responsible water usage, stable electricity prices, community investment, and paying their fair share of taxes.
AI Pumps the Water Trade Higher
But while Smith and his team run interference on the “villagers with pitchforks,” a few more questions remain. When will shareholders push back on the enormous capital outlays? Where, and by whom, will the power be generated to run these plants?
Our prior pick of GE Vernova (GEV) along with other nuclear names are worth watching – add refiners like Centrus (LEU) and Energy Fuels (UUUU) to your watchlist; they’re likely to be clear winners, as small nuclear reactors (SMRs) require a very specific type of fuel.
And one other thing catches the eye here: water, the new scarce commodity. This could be the hidden pick-and-shovel investment the market hasn't focused on yet. On the ETF side, I unearthed the Invesco Water Resources ETF (PHO), the First Trust Water ETF (FIW), the Invesco S&P Global Water Index ETF (CGW), and the GlobalX Clean Water ETF (AQWA).
1 Top Water ETF to Watch
Out of this lineup, the First Trust Water ETF (FIW) intrigues me because it tracks the ISE Clean Edge Water Index, focusing on companies that derive a substantial portion of their revenue from the potable and wastewater industry. Top holdings include Veralto (VLTO), Xylem (XYL), and Ecolab (ECL).
FIW looks pretty impressive, and will likely get added to my own long-term portfolio. The ETF has strong weekly momentum and is poised to make a new all-time high. Of course, you can't make a new high without taking out the old one – in this case, $116.16, set last October.
– John Rowland, CMT, is Barchart’s Senior Market Strategist and host of Market on Close.
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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