Dear Reader,
Everybody is watching Nvidia. They are missing the real trade.
The AI revolution runs on electricity. Not the kind that comes from a wind farm that goes quiet on a calm day. Not solar panels that go dark at 6 p.m. The data centers powering America's artificial intelligence boom need 24 hours of power, 7 days a week, no excuses. And they found their answer in natural gas.
The scale of what just happened is staggering. Data center developers have now announced 189 gigawatts of behind-the-meter gas plant capacity in the United States. Less than a year ago, that number was 97 gigawatts. It nearly doubled. 57 gigawatts already have equipment orders. 7 gigawatts are under construction right now.
Inside today's issue:
- THE WIRE: The 189-gigawatt story Wall Street has not priced in yet
- THE GRID: The Fed just hiked rates. Who wins and who bleeds when money gets expensive
- INVESTOR ANGLE: The midstream toll roads that collect every time an AI query moves through a pipe
- The last energy revolution made investors rich. The next one is already underway.
THE WIRE
Let me give you the number nobody is talking about in the Nvidia conversation: 189 gigawatts. That is the total amount of new natural gas generation capacity that data center developers have now announced or contracted. Behind the meter. Off the public grid entirely. Private plants, built by gas companies, sited directly at the data center campus.
Williams Companies just committed $5.1 billion to build modular gas-fired power plants directly for data center clients. Their Project Socrates, a $1.6 billion gas-to-power contract, is on track for completion this year. Kinder Morgan is doing the same. Every major midstream operator is now a de facto power company.
The EIA confirmed this week that U.S. natural gas production will hit a record 111.7 billion cubic feet per day in 2026. Domestic consumption reaches 92.2 bcfd, also a record. LNG exports climb to 17.4 bcfd, up 23% from last year. The Permian and Haynesville are running flat out. Storage inventories sit 5% above the five-year average heading into winter. Supply is not the problem. The question is who owns the pipe the gas moves through.
THE GRID
On September 16, the Federal Reserve voted 12-0 to raise interest rates 25 basis points, bringing the target to 3.75%-4.00%. Chair Kevin Warsh called it removing a dose of accommodation. He did not say it was the last move. Sixteen of 18 Fed officials expect another hike before year end.
Core PCE sits at 3.4%. Headline inflation revised up to 3.7%, partly because energy prices surged after Iran tensions spiked earlier this year. Higher rates hurt highly leveraged businesses. They do not hurt companies with long-term contracted cash flows and inflation pass-throughs baked into the agreements. Know who has those? The pipeline companies. The midstream operators. The toll roads of the gas network.
When rates rise, money gets expensive. Capital for new pipelines gets expensive too. That means the companies that already own the infrastructure become more valuable. Not less. The moat just got wider.
There is one name I keep coming back to when I run the numbers on this buildout. But first, but first — our friend porter stansberry has been tracking something that connects directly to this story. take a look:
SPONSORED: PORTER & CO
INVESTOR ANGLE
The name I keep coming back to is Williams Companies (WMB).
Williams moves about 30% of all natural gas consumed in the United States through its Transco pipeline system, the largest natural gas transmission system in the country. Every data center campus that now runs on gas-to-power needs that gas to come from somewhere. A meaningful portion of it moves through Williams.
This is not a company betting on which AI company wins. It is not betting on Nvidia or Microsoft or Google. It is the company that collects a fee every time any of them turns on the lights. That is the B-quadrant frame. Do not own the race horse. Own the track.
Kinder Morgan (KMI) operates 79,000 miles of natural gas pipelines. Also worth watching. Also a toll collector. These are not speculative plays. They are infrastructure franchises in a market where demand just doubled in twelve months and is not slowing down.
The mainstream story is the chip war. The real story is the gas war. And the toll roads are already built.
Chris Carroll
Publisher, Money, Power and Profit
P.S. The book Hedge Fund Market Wizards profiles some of the greatest traders alive. And our friend Larry Benedict has his own chapter. Now this former hedge fund manager is turning to oil, and he says the market conditions forming right now are some of the best he has seen in 40 years. Watch the free presentation here.