As artificial intelligence (AI) advances and its applications expand across various sectors, including healthcare, finance, transportation, and manufacturing, the need for reliable energy solutions to power data centers is becoming increasingly urgent. Many companies are actively seeking scalable renewable energy sources to address this challenge and support their growing requirements.
This is where Bloom Energy (BE 8.38%) has an opportunity. With its innovative fuel cell technology, it is capable of meeting technology companies’ energy needs today — not five or 10 years down the road.
The company recently secured a massive agreement that could foreshadow more significant deals, and the stock has surged by an impressive 149% since November. Recently, though, the stock has fallen by 17% from its 52-week high, and trades below $28 per share as I write this. Is it a buy today?
How Bloom Energy can meet the growing demand for energy
The quick uptake in the use of AI technology has led to a significant increase in the demand for energy from the data centers that support this software. Goldman Sachs forecasts that data center power demand will increase at an annualized rate of 15% through 2030. That would leave data centers responsible for roughly 8% of the total power consumption in the United States.
Technology companies are actively seeking solutions to accommodate their data centers’ increasing energy consumption. In September, Microsoft entered into a 20-year power purchase agreement with Constellation Energy that will bring Three Mile Island’s Unit 1 nuclear reactor back online.
Fuel cells could also help meet this growing need. For instance, Bloom’s solid oxide fuel cell technology efficiently converts renewable fuel sources like biogas and hydrogen without combustion. It provides dependable, low-carbon energy, and microgrid solutions for clients that need resilient power.
A significant advantage that Bloom has over some other emerging energy companies is that its technology is ready to deploy today. It can be implemented for clients in just 50 days, and used to complement the energy supplied by the power grid. Furthermore, this technology allows data centers to function independently as “islands,” eliminating their dependence on the electric grid — making it an especially attractive option for energy-intensive AI businesses.
Bloom has made serious headway in the past year
Since the company went public in 2018, it has struggled financially. In the last year, Bloom Energy incurred losses of nearly $130 million against total revenues of $1.25 billion. Although it has improved its margins, securing additional large clients will be essential to further validate its offerings and move the company toward positive cash flow. Over the past year, it has done just that.
In May, the company announced a power purchase agreement with Intel to install additional megawatts of its fuel cell-based Energy Server at Intel’s high-performance computing data center in Santa Clara, California. In July, it partnered with the Nvidia-backed AI hyperscaler CoreWeave to generate on-site power for its high-performance data center in Illinois.
Image source: Bloom Energy.
In November, American Electric Power signed an agreement to purchase up to 1 gigawatt (GW) of solid-state fuel cells from Bloom Energy for data centers and other large commercial and industrial applications. Evercore, an investment bank, described this development as a “big win” for the company, while Morningstar called it “a potential game changer for Bloom.”
Following the deal, analysts at Morgan Stanley raised their EBITDA estimates for Bloom by 35% for 2025 and 62% for 2026, anticipating that the order will be filled over the next four years.
Is Bloom a buy?
As energy demand grows, Bloom Energy looks particularly appealing because its products are ready to deploy today. Contrast this with traditional nuclear power plants, which take years to construct and bring online, and small modular nuclear reactors, which may not be ready for commercial deployment until the 2030s.
Bloom Energy is making solid progress, and its partnership with American Electric will help it showcase its ability to provide quick, scalable energy solutions. It also puts Bloom in a prime position with a utility client that has forecast a 20% annual growth in its commercial load over the next three years.
Analysts covering the stock expect that Bloom could report earnings of $0.06 per share in 2024, and project that could grow to $0.43 per share in 2025.
There are risks here for investors if new deals fail to materialize or if the deal with American Electric Power — which isn’t a firm order — fails to meet expectations. For that reason, this up-and-coming energy stock isn’t suitable for conservative investors. That said, Bloom has made solid progress and will look to build on its momentum in 2025, making it a good growth stock pick for long-term investors willing to tolerate some risk.
Courtney Carlsen has positions in Microsoft and Morgan Stanley. The Motley Fool has positions in and recommends Goldman Sachs Group, Intel, Microsoft, and Nvidia. The Motley Fool recommends Constellation Energy and recommends the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
