The rapid build-out of data centers in Europe creates an opportunity for certain electricity companies that can meet the continent’s growing power demand, according to Goldman Sachs. In a note published on Wednesday, Goldman made the case for an earnings “super cycle” in the utilities sector after its research found that electricity bill increases in Europe will be much lower than anticipated. The analysts wrote that a common fear among investors is that the scale of infrastructure investment required for electrification becomes too expensive, derailing the sector’s growth. “We estimate electricity bill increases over the coming ten years will average between +2% and +4% per annum,” the analysts wrote. “These figures are significantly below prevailing expectations, and also lower than the +5% annual increase in electricity bills experienced by European consumers over the past ten years.” Goldman recommends a host of stocks that could benefit should that prediction stay on track, with several of its picks tied to hopes for a revival in wind energy. The first is a ‘buy’ rating for Danish wind giant Ørsted, which Goldman sees benefiting as Europe increasingly pivots energy policy towards offshore wind power after the continent experienced its second price shock in five years. Rising electrification needs open the door for Ørsted to meet demand, Goldman said, while a recent softening in the U.S. administration’s stance on wind farms would allow the firm to continue building overseas. “While we cannot rule out another government intervention, we believe it is possible that the administration might allow projects already under construction to reach completion,” the analysts wrote. Portuguese renewables firm EDPR , the world’s fourth-largest producer of wind power, is also on Goldman’s buy list. Its rationale is that U.S. renewable activities account for two-thirds of the business, which analysts said is an overlooked area in the market at present. One final wind pick for Goldman is German onshore wind provider Nordex . “We expect further improvement in margins and higher cash returns which, combined with an uptick in onshore US and German orders into this year, sets the stage for the company to achieve its medium-term outlook, and we expect the strong share performance to continue,” the analysts wrote. Nordex shares are up 30% year-to-date, as the sector looks to have found a new purpose in the wake of the U.S.-Iran conflict. Wind giants across the board posted strong first-quarter results , and Goldman believes the comeback is set to continue.
Goldman says Europe’s data center electricity demand boom could light up these stocks
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