The potential for artificial intelligence to drive transformative change may be overshadowed by the inability of an aging power grid to meet the enormous electricity requirements of AI systems, according to Fidelity Portfolio Manager Julia Pei, who believes nuclear power will play an important role in managing AI-driven demand for power.
“We are on the brink of a new era where nuclear power, as a green energy source, has the ability to provide baseload generation that can run at all times,” says Pei, who co-manages Fidelity® Environment and Alternative Energy Fund (FSLEX) with Brian Aronson. “In other words, nuclear tends to be more reliable, run for longer and require lower maintenance.”
The fund is a thematic strategy that is tightly focused on companies powering the shift to a green, clean economy. At the helm since 2021, Pei has structured the portfolio on the belief that disruptive, transformative businesses offering products and services in support of this shift should substantially outpace global gross domestic product (GDP).
“Corporations, governments and other enterprises committed to the rapid build-out of AI-related infrastructure have only intensified the need for more reliable and sustainable power sources, as decades of underinvestment have left the current power grid in dire need of an upgrade,” Pei explains.
Nuclear power stands out for its reliability and efficiency, points out Pei. “Unlike other energy sources, nuclear plants can run continuously, providing a steady stream of electricity with minimal maintenance, making it an ideal solution for the 24/7 power requirements of major cloud-service providers committed to net-zero targets and clean-energy investments,” she says.
Pei adds that the renewable electricity production tax credit has enhanced the financial appeal of nuclear power. This incentive, she notes, coupled with growing demand for reliable and sustainable energy, positions nuclear power as a potentially lucrative investment opportunity.
Among the utility providers she’s favored are Kansai Electric Power (KAEPF), a Japanese firm that has successfully restarted one of its nuclear power plants; and Vistra (VST), an independent power producer that owns a portfolio of nuclear power plants and has capitalized on the tight supply/demand imbalance, particularly in Texas.
“I plan to continue monitoring this rapidly developing segment of the industry, including both public and private companies, to ensure I stay ahead of emerging investment opportunities,” concludes Pei.
For specific fund information, including full holdings, please click on the fund trading symbol above. Securities mentioned were fund holdings as of January 31.
Julia Pei is a research analyst and portfolio manager in the Equity division at Fidelity Investments.
In this role, Ms. Pei manages Fidelity Environment and Alternative Energy Fund and Fidelity Select Retaining Portfolio. She is also responsible for equity research coverage of environmentally thematic industrial, technology, and energy stocks, along with soft line and apparel retail companies.
Prior to joining Fidelity in 2018, Ms. Pei was an associate at Equity Group Investments, the Zell family office. She has been in the financial industry since 2012.
Ms. Pei earned her bachelor of arts degree in economics from The University of Chicago and her master of business administration from The Wharton School of the University of Pennsylvania.