One of the most discussed topics as it pertains to artificial intelligence (AI) is which companies will be adopters of this technology and how much capital are they willing to commit.
It’s appropriate to ponder those issues, particularly for investors considering exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), both of which are chock full of AI enablers. Frequently noted in the back half of 2024, the analysts and investors have shifted their AI views to adoption and capital commitments. They want to see tenable, long-standing agreements by companies in a variety of sectors to embrace AI.
Said another way, the AI investment thesis has put hype in the rearview mirror and is now all about results. Those results can be accrued via sector-level adoption. While AI is still in its early innings, there’s evidence it has applications in an array of sectors. Perhaps surprising to some investors is the inclusion of traditional energy on that list.
Energy Embracing AI in a Big Way
In what could be a long-term positive for QQQ/QQQM AI enablers, fossil fuels producers are increasingly turning to AI. On the surface, this is a surprising relationship. AI’s status as a glamourous enterprise contrasts starkly with drilling for oil and natural gas. However, it’s proving to be an ideal match.
A deeper examination reveals that energy production is technology-intensive. Embracing tech, including AI, helps U.S. energy companies produce oil and gas more efficiently and cleanly than rivals in some developing markets.
“Oil drilling is a digital enterprise as much as a mechanical one today. Fields are seeded with sensors gathering reams of information about pressure, heat, radiation, and rock lithology. The action happening at the wells, tanks, and compressors is displayed on a screen hundreds of miles away—and it’s often being controlled from there, too,” reported Avi Salzman for Barron’s.
As noted in the Barron’s article, energy companies that are leaning into AI are realizing production efficiencies. They’re produce oil and gas in a quieter fashion with reduced methane-flaring, a major contributor to greenhouse gas emissions.
The bulk of U.S. onshore production occurs at shale formations, such as the Permian Basin in Texas and New Mexico. This adds to the AI adoption case for energy producers. Fracking is the process by which oil and gas are extracted from shale plays. Knowing exactly where to frack isn’t easy. AI can help.
“Knowing where to frack can be an enormous advantage. The AI tools that Chevron has developed can predict which sections of the subsurface will yield the most oil, and which rock types will prove tricky to drill,” according to Barron’s.
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