(MSN) - With the easy money having been made this year on power and electricity companies linked to AI, investors will need a much more selective strategy to see gains in the sector for 2026.
That’s according to Tuttle Capital Management’s chief executive officer and chief investment officer, Matthew Tuttle, who predicts the “scarcity stampede” that caused solar, gas and coal companies to surge this year will dissipate.
“In 2026 the market won’t ask ‘is AI big?’ It’ll ask ‘who’s actually getting paid, and when?’ Tuttle wrote in a blog post.
He notes that valuations for many AI power winners are already pricing in near perfection, which means more good news will be needed to lift shares, but far less is required to drive them lower. That’s as those companies face bottlenecks from lack of contractors, skilled labor, equipment and transmission to deliver power to compute, he said.
Tuttle rattled off a list of the biggest potential losers next year: companies that claim to be AI power developers, but with no actual sales; speculative names within the small modular reactors space lacking actual deliveries; and “any project that depends on perfect financing+perfect permitting+perfect grid access.”
He suggests focusing on second-order companies “selling the shovels,” such as those with signed contracts and long-term power purchase agreements who get paid no matter whether the tenant is OpenAI, Meta or whoever wins the model race.
One group of companies he flags are those involved in the grid build-out. Tuttle likes companies working in transmission and distribution build-out, substations and interconnection work, utility-side hard goods and components. Quanta Services MYR Group MasTec and Hubbell are all potential beneficiaries, he said.
“Even if AI sentiment cools for a quarter, grid backlogs don’t vanish. These projects are multiyear bottlenecks,” he said.
He also likes companies linked to power distribution, switchgear, uninterruptible power supply, breakers and busways, such as Eaton Corp. Powell Industries and Vertiv Holdings
Cooling is another area he sees poised for demand in 2026, as AI server racks will need lots more of that given their density. “Cooling is becoming a constraint on how much compute you can deploy, and not just an operating cost,” he said, flagging Trane Technologies Carrier Global and Johnson Controls as well as Vertiv Holdings.
Other picks and shovels include those involved in power backup such as Generac Holdings Cummins and Caterpillar or specialty contractors who can install and deliver on time, such as EMCOR Group Comfort Systems and Sterling Infrastructure Tuttle said.
By Barbara Kollmeyer
December 30, 2025
