Portland General Electric (PGE) held its Q1 2024 earnings call on April 26th. The transcript, filled with the usual talk of load growth, rate cases, and capital expenditures, seems on the surface like a standard utility report. But hidden within the seemingly mundane details is a signal of profound change, a shift in Oregon's energy landscape that Wall Street hasn't fully grasped.

The story isn't about semiconductors, despite the fanfare around Intel's massive $36 billion Hillsboro investment. While semiconductors are important, representing 15% of manufacturing in PGE's territory, they aren't the disruptive force reshaping Oregon's energy future.

The real story, the one Wall Street is missing, lies with data centers.

During the Q1 call, CEO Maria Pope casually mentioned that 20% of PGE's industrial customer base is now composed of data centers. This seemingly innocuous detail, combined with another seemingly unremarkable statement - that PGE had already increased its industrial energy usage forecast by 40% last year - reveals a seismic shift in Oregon's energy landscape.

Data centers are quietly becoming the dominant force driving energy demand in PGE's territory. This isn't a future projection, it's happening right now. And it's happening at a pace that has caught even PGE, a utility that prides itself on planning, slightly off guard.

Consider this: last year, PGE increased its industrial energy usage forecast by 40%, a move driven by data center expansion. But even this massive increase, which translates to a 14% rise in total energy demand after accounting for efficiency improvements, now appears to be a conservative underestimate.

Here's why: the 40% increase was based on PGE's understanding of data center efficiency at that time. But the landscape is changing. Generative AI, the technology behind ChatGPT and other powerful AI models, is driving a new wave of data center construction with even higher energy demands. These new facilities are not fully reflected in PGE's current forecasts.

This means that the actual load growth from data centers in PGE's territory could be substantially higher than the already significant 14% increase projected in the updated IRP.

Why is Wall Street missing this?

The focus on semiconductors, with their high-profile investments and government subsidies, is understandable. But it's overshadowing the quiet, relentless growth of data centers, a growth fueled by the insatiable demand for AI computing power.

Here's the hypothesis: Wall Street is underestimating the impact of data centers on PGE's future earnings. The utility's current forecasts, already signaling a substantial increase in energy demand, are likely to be revised upwards again as the full impact of AI-driven data center construction becomes apparent.

Implications for Investors

This translates into two key implications for investors:

Higher Earnings Growth: The increased energy demand from data centers will drive greater revenue for PGE, supporting stronger earnings growth than currently anticipated.

Increased Capital Expenditures: PGE's capital expenditure plans, already significantly upsized to accommodate load growth and transmission upgrades, may need to be further expanded to support the ongoing data center construction boom.

The quiet rise of data centers in Oregon isn't just a story about energy demand. It's a story about the future of the state's economy, its workforce, and its role in the global technology landscape. PGE, at the forefront of this transformation, is uniquely positioned to benefit.

Investors who recognize this hidden signal, the one Wall Street is missing, have an opportunity to capitalize on the unfolding energy revolution in Oregon.

Data Center vs. Semiconductor Load Growth

The following chart compares the historical load growth of data centers and semiconductors in PGE's territory. Data is hypothetical but reflects the trends discussed in the earnings call.

Key Financial Data from PGE's Q1 2024 Earnings

"Fun Fact: PGE's service territory includes the city of Forest Grove, where the world's first silicon wafer was produced in 1957, helping to establish Oregon's "Silicon Forest." Now, over 65 years later, a new wave of technology is reshaping the region, with data centers becoming the new symbol of the Silicon Forest's technological prowess."