Artificial intelligence (AI) is reshaping industries, driving innovation and accelerating the digital economy. But behind every AI breakthrough is a fundamental and often overlooked truth: AI runs on energy. Without reliable, scalable and cost-effective power, the AI revolution simply wouldn’t be possible. The Westwood Salient Enhanced Midstream Income ETF (MDST) and the Westwood Salient Enhanced Energy Income ETF (WEEI) seek to offer investors a way to capitalize on the rising energy demand driven by AI and data center expansion.
AI workloads are rapidly increasing, as training large models requires exponential amounts of electricity. Researchers at the University of Michigan noted training GPT-3 alone consumed 1,287 MWh — equivalent to the annual electricity usage of 120 U.S. homes. As AI inference (the everyday use of AI models in search, automation and cloud computing) becomes more common, a Goldman Sachs Research report forecasts that U.S. data centers’ electricity usage will increase from 3% of the nation’s total in 2022 to 8% by 2030, driven by the rising demand for AI and data processing.
Data centers, the infrastructure supporting AI and cloud computing, are facing unprecedented energy constraints. Northern Virginia, known as “data center alley,” hosts more data centers than the next five largest U.S. markets combined, yet power limitations could slow expansion. Goldman Sachs estimates global data center power usage could surge from approximately 55 GW recently to 84 GW by 2027, requiring a significant increase in natural gas demand.
With renewable energy infrastructure taking years to build, natural gas remains the most viable, abundant, and cost-effective solution to support AI’s power needs. According to Goldman Sachs, meeting AI-driven electricity demand could require up to 16 Bcf/d of natural gas by 2030, necessitating the construction of 6.1 Bcf/d of new pipeline capacity at a cost of $7.4 billion. Industry leaders like Kinder Morgan (KMI) highlight the growing importance of natural gas as data centers demand immediate, stable power solutions.
This structural shift presents a compelling opportunity for energy infrastructure companies, including midstream operators such as Williams Companies (WMB), Kinder Morgan (KMI), DT Midstream (DTM) and TC Energy (TRP), all of which stand to benefit from rising natural gas transportation demand. MDST and WEEI provide investors with exposure to this critical sector, allowing them to participate in the energy expansion needed to sustain AI’s rapid growth.
Beyond AI, Bitcoin mining is another major driver of energy consumption. In 2021, the Cambridge Bitcoin Electricity Consumption Index (CBECI) estimated that Bitcoin mining consumes around 120 TWh annually — more electricity than Argentina or the Netherlands. The Cambridge Centre for Alternative Finance (CCAF) notes, as of January 2022, the majority of Bitcoin mining remains powered by fossil fuels, primarily natural gas and coal, reinforcing the demand for traditional energy infrastructure. With many mining operations relocating to regions rich in natural gas, this trend further solidifies the investment case for midstream energy assets.
Why MDST and WEEI?
MDST and WEEI aim to provide exposure to high-quality midstream and energy infrastructure companies positioned to benefit from AI-driven electricity demand and the broader energy transition. As AI and digital transformation accelerate, we believe energy will remain the indispensable force behind technological advancement.
For investors looking to capitalize on AI’s explosive growth without taking on the high valuations and volatility of pure-play tech stocks, MDST and WEEI may offer a differentiated approach — investing in the very foundation that makes AI possible: energy.