AI trade isn’t just about tech stocks but also power, TCW says

TCW Group advises focusing on the energy infrastructure as a broader and more enduring opportunity beyond just data center-driven demand, driven by AI, industrial reshoring, transportation electrification, and aging grid replacement.
US electricity demand is projected to grow 2%-3% annually due to multiple factors, with AI data centers contributing significantly to this growth.
The grid faces widespread bottlenecks affecting generation, transmission, substations, and other components, resulting in constrained capital flow to companies that can address these bottlenecks.
Even if AI capital expenditure decreases, the US would still face substantial load growth because of various other factors, making the infrastructure needed to power AI long-term.
TCW’s Transform Systems ETF emphasizes investment in physical infrastructure related to AI, electrification, and energy security, including companies involved in power components, natural gas, LNG, automation, power semiconductors, and grid modernization.

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