For thirty years, TMT and Energy traded as anti-correlated factor bets. That relationship has quietly inverted. The cause is AI, but the implication runs deeper than “datacenters need power.”
The structural link
Every incremental dollar of AI capex creates roughly $0.40 of new electricity demand over the following 36 months, on my numbers. The grid was already capacity-constrained before this wave started. Two things have to happen: behind-the-meter generation builds out, and front-of-meter transmission gets repriced. Both create durable equity stories.
Portfolio implication
The classic “barbell TMT against energy as a hedge” trade is now closer to a paired long. The factor exposures stack rather than offset. This matters most for anyone running a thematic sleeve — your beta is probably higher than you think.