Missed Out on Nvidia? This AI Energy Stock Might Be the Next Big Winner.

Since the release of ChatGPT in November 2022, Nvidia stock has surged by over 1,090%, helping make it one of the most valuable artificial intelligence (AI) stocks around. Now hyperscalers are facing bottlenecks in power and equipment and are scrambling to secure reliable energy.

One company making headlines in recent weeks for its partnership with Nvidia to power next-generation AI factories is Fluence Energy (NASDAQ: FLNC). Could Fluence be the next big AI winner? Let's dive into the company and its new partnership to find out.

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Fluence's partnership with Nvidia could be a game changer

Established in 2018 as a joint venture between Siemens and global independent power producer AES Corp., Fluence went public in 2021. The company offers modular, utility-scale battery energy storage systems (BESS) for commercial, utility, and industrial customers, along with software optimization tools to stabilize electrical grids.

Because high-density AI computing workflows place highly volatile load demands on power infrastructure, hyperscale data centers are vulnerable to severe voltage drops. On top of this, hyperscalers face multiyear delays in utility interconnections to the power grid. As a result, Fluence's quick-to-deploy, containerized battery system enables data centers to power massive facilities ahead of traditional public transmission line upgrades.

On June 1, Fluence Energy, along with Siemens and nVent Electric, partnered with Nvidia to provide industrial power and electrical architecture to power Nvidia's next-generation AI factories. Fluence's Smartstack architecture will be integrated within Siemens' AI data center reference architecture blueprint for Nvidia's advanced DSX Vera Rubin NVL72 AI factory platform. Fluence's battery system will act as a shock absorber, using software to handle severe load fluctuations and provide supply voltage and frequency ride-through protection for sensitive GPU clusters against disruptions.

Barclays analyst Christine Cho notes this could open up a massive new sales channel for Fluence Energy. The move could rerate Fluence stock, not only for its growth but also for its high-margin, recurring software platform, which could help margins grow long-term.

Is Fluence stock right for you?

Buying Fluence today carries risks, primarily due to fierce competition from Tesla and other domestic automotive manufacturers repurposing underutilized factory space for utility-scale grid battery storage. Other risks include its cash burn over the years and low gross margin amid heightening competition.

That said, Fluence Energy's deal with Nvidia incorporates its technology into the design of new AI factories, and the move could give the stock a much-needed boost after years of negative free cash flow. Analysts covering the stock think its earnings could improve as soon as 2027, thanks to this new growth avenue.

Investors must balance the risks of rising competition with the potential rewards of long-term growth and margin expansion from this partnership with Nvidia. For that reason, the stock is best suited to aggressive investors bullish on the long-term outlook for Fluence's energy solutions business.

Courtney Carlsen has positions in Fluence Energy and Nvidia. The Motley Fool has positions in and recommends Fluence Energy, Nvidia, and Tesla. The Motley Fool recommends Barclays Plc and Siemens Energy Ag. The Motley Fool has a disclosure policy.