AC’s electricity surge is more appealing than AI’s

AC also has more positive spillover effects than data centers. AI power demand has meant rapidly rising electricity prices in developed countries due to equipment bottlenecks, worries over pollution, and fear of mass unemployment. AC, meanwhile, saves lives. The World Health Organization estimated in June that over 200,000 people in Europe died from heat over the past four years, with nearly all cases being preventable, and 500,000 annual deaths globally between 2000 and 2019.

AC’s efficiency can also be improved. About half the units being installed in the U.S. now are air-source heat pumps that can also provide warmth in the winter, but operate more efficiently and produce less pollution than traditional sources like gas or oil. Since heating typically requires far more energy, there is usually a net reduction in energy used.

As for who and which companies will gain, it’s again worth comparing to AI. While that technology has caused astonishing valuation gains in a few big technology companies developing models and chips, air conditioning is a largely mature technology with relatively low barriers to entry. Hence gains are spread wide. Lennox International, which largely concentrates on residential and office heating and cooling, trades at 20 times the next 12 months’ earnings, according to analyst estimates collected by LSEG. Peer Trane Technologies, which has a large data center cooling business, trades at a 50% premium.