In our latest analysis, we spotlight the top 10 AI stocks currently capturing investor attention, with a particular focus on where Alphabet Inc. (NASDAQ: GOOGL) ranks among them. This week, insights from investment firm Morgan Stanley have shed light on the resilience of electricity demand, especially in the context of potential economic downturns spurred by policies from former President Trump, particularly his tariff initiatives.

According to Morgan Stanley's projections, the demand for electricity is expected to remain steadfast, irrespective of any impending recession. The primary driver behind this anticipated demand is the significant power consumption required by data centers. These facilities, which support vast amounts of digital infrastructure, will continue to need substantial energy supplies, a trend that is unlikely to diminish, even if there is a temporary dip in industrial demand or enhancements in operational efficiencies by companies such as Ant Group and DeepSeek.

Interestingly, while industrial demand may experience a short-term decline, the report highlights a long-term solution through the reshoring of manufacturing to the United States. Morgan Stanley articulates this viewpoint: We believe power demand trends are more durable than in prior cycles, in part due to the inelasticity of data center demand. Industrial demand could decline in the near term, but reshoring of manufacturing is a long-term tailwind.

Further reinforcing this narrative, a report from Bloomberg anticipates that by 2025, the demand for electricity from data centers in the U.S. could escalate by an astonishing 20-40%. As the digital landscape expands, strong double-digit growth rates are projected to continue into 2026-2030. This growth is primarily fueled by the ongoing advancements and implementation of artificial intelligence technologies.

Morgan Stanley has also indicated that while rapid policy shifts could impact large capital investments, they forecast a tenfold increase in electricity consumption stemming from AI applications by the year 2028. They caution, however, about the potential for a near-term 'shock' in demand, which could lead to a slowdown in order growth for certain companies. The firm notes, With this in mind, we do not want to minimize the risk of a near-term shock in demand. This could translate into slowing order growth for some companies.

Historically, energy stocks have demonstrated remarkable resilience during economic downturns. Morgan Stanley's analysis reveals that, since 1960, electricity demand has only averaged a decline of 0.2% during recessions. This pattern suggests that utilities may be particularly well-positioned, as they are inherently defensive in nature, making them attractive investments during economic instability.

In light of these insights, Morgan Stanley expresses optimism regarding robust expenditures on AI infrastructure from major tech players like Meta, Amazon, and Alphabet. These so-called hyperscalers are motivated to maintain a competitive edge in artificial intelligence, coupled with their extensive product pipelines that necessitate powerful Graphics Processing Units (GPUs).

For the purpose of our article, we meticulously curated a selection of AI stocks by analyzing various news articles, stock evaluations, and corporate press releases. These stocks are not only trending among investors but are also favored by hedge funds, with the latest data reflecting positions as of Q4 2024.

Why do we emphasize stocks favored by hedge funds? The rationale is straightforward: our research indicates that mirroring the top stock selections of leading hedge funds can yield higher market returns. Our quarterly newsletter employs a strategy that selects 14 small-cap and large-cap stocks each quarter, achieving an impressive 373.4% return since May 2014, and surpassing its benchmark by a remarkable 218 percentage points.