Old West Fund Sees AI Power Crunch Lifting NatGas, Coal, Nuclear

Old West Investment Management came out of the second quarter with a portfolio return of -0.94% net and a conviction that the market has not priced what AI data centers will do to power markets. The fund sees a structural shortage in electricity that lifts natural gas, coal, uranium, and the companies that produce or transport them.

Hyperscalers are on track to spend $700 billion this year, the fund estimates, with trillions more over the next few years. That capital has pushed power semiconductors into a demand inflection and exposed bottlenecks across heavy electrical equipment and grid interconnection. Multi-year tie-in times are pushing companies to build their own power, and even that has become subject to delays.

Navitas Semiconductor was the standout holding. The company makes gallium-nitride and silicon-carbide power chips that convert electricity with less heat loss, and it shifted focus from phone chargers to AI data centers and grid applications. Revenue returned to growth in the second quarter, guidance beat Wall Street estimates, and Baird more than doubled its price target. The biggest catalyst came in June when Nvidia featured Navitas' power technology at its Computex showcase. Old West said the real constraint on AI is not intelligence but electricity, and Navitas' chips help deliver it.

Bruker Biosciences reversed its first-quarter decline after introducing new instrument platforms and flagging semiconductor demand. Bank of America raised its price target from $49 to $65, and by late June the shares were near their 52-week high. Old West sees Bruker's mass spectrometry, X-ray, and microscopy systems as tools that convert physical-world data into something AI can use.

Nokia was a surprise revaluation story. The fund described it as one of the last major Western suppliers of telecom and optical networking equipment. Its Infinera acquisition gave it exposure to the optical networks that connect data centers. Revenue from AI and cloud customers rose 49% in the first quarter, with roughly €1 billion of orders from those customers. JPMorgan raised its price target from $14 to $21, and the stock had roughly doubled year-to-date by early July. The AI buildout brought new attention to a business the market had written off.

On the commodity side, the fund sees a disconnect between gas prices and fundamentals. Natural gas fell back toward $3 during the quarter as the war premium came out of the market. Old West argues that gas is still priced as if the electricity shortage is not happening. Heavy-duty gas turbines are sold out for years. Data center power needs keep growing. Gas trades near cyclical lows. The fund owns Antero Resources, a large Appalachian producer with midstream and liquids infrastructure that gives it strong access to LNG export markets.

Coal got a similar read. Core Natural Resources, formed through the merger of Arch Resources and CONSOL Energy, beat earnings estimates and kept buying back stock. The Department of Energy selected a CNR subsidiary to build a pilot facility that extracts rare earth elements from coal waste. Old West said coal stocks are priced as if their end markets are dying, while electricity demand is rising for the first time in a decade.

Tidewater gave back some of last quarter's gains as Brent fell from a $126 high back below $80 after the U.S.-Iran agreement took the war premium out of oil. The fund said offshore stocks trade with oil, so TDW fell from its April highs. Vessel supply is tight. The global fleet is old. Oil is still well above where the year began.

The fund drew a historical parallel not to the 1970s but to the 1870s, when the steam engine, railroads, telegraph, and electric grid transformed the economy. Old West argued that AI is driving a similar industrialization wave, with capital flowing through a small number of industries and creating stress at every point in the supply chain. Power has become the defining constraint.

Customers have started trading performance for speed, using less efficient but readily available gas engines. Meta is proposing to string together over 800 reciprocating engines for a data center in El Paso. xAI took a similar approach in Memphis, deploying dozens of mobile gas turbines. Chevron signed a 20-year power agreement with Microsoft for a multi-gigawatt facility directly in the Permian basin. Meta announced a $10 billion data center in Alberta, looking to take advantage of low Canadian gas prices.

Old West said it continues to find value in metals and mining companies that sold off on fears of higher interest rates. The fund argued that central banks will find it harder to address inflation with higher rates because the shortages are supply problems, not demand-driven inflation. Higher rates do not affect the concentrated demand from data center buildout. Inflationary pressure will continue until supply investments are made.

The SpaceX IPO raised $85 billion and hit a $2 trillion valuation, making Elon Musk the world's first trillionaire. Old West said the large aerospace and defense companies remain an area of interest, especially after recent weakness.

Fund performance and holdings data as of June 30, 2026. This commentary is for educational purposes only and does not constitute investment advice.