I'd Rather Bet on AI's Electric Bill Than Its Chips. Here's Why.

Who is winning the artificial intelligence (AI) chip war? Right now, it looks like Nvidia (NASDAQ: NVDA). But at one point, Intel (NASDAQ: INTC) was the chip industry's "undisputed" king. Being atop the chip industry just means everyone is gunning for you, and there's always a risk you'll be unseated.

There are many companies competing to produce AI chips. But there's one thing that every AI chip needs: Electricity.

Artificial intelligence is just a fancy computer program

When you break it down, artificial intelligence is simply a very complex computer program. It needs a lot of computing power, for sure, so having the best chips is important. But regardless of which chip ends up reigning supreme in the AI space, they will all need electricity to run. I'm not willing to bet that Nvidia's lead in AI chips lasts, but I know that modern life, including AI, can't continue as it is without reliable electricity.

Image source: Getty Images.

This is a pick-and-shovel view of investing. That saying harkens back to the gold rush, when the people who reliably made money were the ones selling picks and shovels to miners. The chance of a specific miner striking gold was hit-or-miss, at best. The same is true for AI chipmakers.

And if the AI gold rush doesn't turn out to be as successful as everyone hopes, I'm still willing to bet that electricity remains highly important to the world. So, by investing in electricity stocks, I win if AI wins and I win if AI flames out. I like those odds in case the worst-case scenario for AI comes to pass.

Which is why I own Brookfield Renewable Partners (NYSE: BEP), Southern Company (NYSE: SO), and Black Hills (NYSE: BKH). I've owned them for years now, largely because they pay reliable dividends (Black Hills is a Dividend King, with over 50 consecutive annual dividend increases) and offer attractive yields. Brookfield Renewable, meanwhile, is focused on clean energy, which taps into another global trend.

A one-stop shop to benefit from AI's power demands

That said, if you are looking to own just one utility to benefit from AI, a good choice would be NextEra Energy (NYSE: NEE). It operates a large regulated utility business and is also one of the world's largest producers of solar and wind power. It's kind of like owning Southern and Brookfield Renewable, but you only have to buy one stock.

With a yield of nearly 3% (the utility average is around 2.6%) and decades of annual dividend increases behind it, NextEra Energy could be the perfect picks-and-shovels AI power play for your dividend portfolio today. As an added bonus, NextEra Energy is in the middle of acquiring Dominion Energy (NYSE: D), which will make it an even more dominant utility. And it is basically explicit proof that the company is leaning into the world's growing demand for electricity.

Reuben Gregg Brewer has positions in Black Hills, Brookfield Renewable Partners, and Southern Company. The Motley Fool has positions in and recommends Intel, NextEra Energy, and Nvidia. The Motley Fool recommends Brookfield Renewable Partners and Dominion Energy. The Motley Fool has a disclosure policy.