There’s a reason investing in energy is (usually) boring.
The energy industry is usually a relatively slow-moving industry with periodic spikes and crashes in commodity prices, leading to bankruptcies when someone takes a few too many risks.
It’s possible to make money in energy, but it’s usually a slow and steady wins the race kind of business.
The current environment is telling us “this time is different” as AI changes energy needs around the world.
But is it?
Euphoria in energy often ends in disaster.
I’m seeing a lot of new energy experts these days. Investors who a few months ago were experts on chips are now lecturing about the economics of gas turbines and fuel cells. They cite backlogs measured in years and a new bottleneck to AI’s explosive growth.
We’ve seen this before.
I’ve seen this before. And I’ve been burned!
Energy goes through cycles, and the currency cycle has more attention than previous cycles, but it’s no different.
When the price of a commodity goes up, investors get excited and flood money into the industry to build capacity. Eventually, either demand falls or supply overshoots demand, leaving long-term investors holding the bag as companies struggle to survive.
I think history will repeat itself, which I’ll get to in a moment.
Energy Is Just…Energy
We don’t know what’s going to happen with energy stocks in the future, but I want to bring some caution into the conversation based on nearly 20 years of experience following the industry.
I know AI seems like it changes the game for everything, but in the case of energy, following the shiny new thing can end in disaster.
The Funny Thing About Energy
The crazy thing about energy is that it’s fungible.
A unit of electrical power from natural gas in Seattle is the same as a unit of electrical power in Florida made from solar energy. Yes, time and availability matter, but over time, power is power.
Energy is also valued on the next incremental unit of energy. If the world needs 101 million barrels of oil and there’s only 100 million barrels available, prices might jump 50%.
But if there are 100 million barrels available and 99 million barrels of demand, prices could plummet.
This is what causes the boom and bust, as someone always thinks the higher prices will last forever. Natural gas plants went through a bust cycle in the 2010s as wind and solar supply came online and wholesale electricity prices plummeted.
And there are very few moats.
If you want to build a power plant for AI, the competition is with every other energy source. One energy source may be more popular from time to time, but they’re all at their core commodities.
And commodities are not durably high-growth, profitable businesses.
They go boom!
And they go bust!!!
Shale & Oil Drilling Boom & Bust
From 2010 to about 2016, I started in solar, but made my way to natural gas, shale drilling, and offshore drilling because those were the popular parts of the market.
The money being made in shale and offshore at the time was astounding.
A perfect example was $Seadrill(SDRL)$ , an owner of offshore drilling rigs that was building rigs as fast as possible to meet what seemed like an insatiable demand for ultra-deepwater wells. That’s where the big oil discoveries were in those days, and you needed specialized ships to reach them.
In 2013, the company signed a 180-day contract for $150 million, or $833,000 per day.
The business printed money, and Seadrill was worth over $19 billion in 2013.
In 2017, the company filed for bankruptcy.
Demand for ultra-deepwater ships dried up as shale drilling improved and global oil demand stopped growing.
And Seadrill wasn’t the only one. As I looked back on companies I used to follow like $Transocean(RIG)$ , $Continental Resources(CLR)$ , Whiting Petroleum, and $Pioneer Natural Resources(PXD)$ , I found that most of them had fallen 80-90% and were either bought out by competitors or taken private.
In energy, booms become busts.
My Solar Mistakes
I started covering the solar industry formally in 2009 when about 7 gigawatts (GW) of solar was installed globally. What I saw was an industry that was becoming more cost competitive with fossil fuel electricity generation and could grow exponentially. And it did!!!
In 2025, 647 GW were installed in a single year.
And still, nearly every stock I covered from 2009 to 2015 either went bankrupt or has been a disaster for investors.
Why?
Solar energy is hyper-competitive, and suppliers are competing on both technology and cost vectors, making it nearly impossible to build a sustainable, differentiated business long-term.
Like every other segment of the energy business, it has been commoditized. A few companies, like First Solar, survived and innovated their way through the market’s ups and downs. But exponential growth in solar energy production did not lead to exponential growth for investors.
Is This Time Different?
Why do we think this time is different?
Why are gas turbines ( $GE Vernova Inc.(GEV)$ ), nuclear plants ( $Oklo Inc.(OKLO)$ ), and fuel cells ( $Bloom Energy Corp(BE)$ ) somehow 10x more valuable businesses today than they were two years ago?
I’ve seen estimates that the U.S. alone needs an additional 100 GW of energy capacity to meet AI needs. In the grand scheme of things, that’s not a lot. In 2026, the U.S. plans to add 86 GW of capacity.
What makes AI data centers unique is that they don’t plan ahead, as utilities do. They want to start construction tomorrow, put chips in next month, and have a power plant dedicated to them by the end of summer.
Now! Now! Now!
I’m exaggerating, but not by much.
Based on the results we just got from hyperscalers, you can see why they’re in a rush. AI demand is growing exponentially, and no one wants to miss an opportunity to capitalize on demand.
So, they’re building their own power plants. They’re buying fuel cells that are expensive, but can be deployed quickly.
It’s ALL HANDS ON DECK.
AT ANY PRICE!
Until it isn’t…
One day, probably sooner than you think, the “build as fast as possible and pay whatever it takes” days in energy will come to an end. Capacity will be built up to meet supply, data centers will get more efficient, and maybe we’ll see AI demand growth slow.
The crash seemed unfathomable in energy in 2014, at least to me. But it happened.
Just like it happened in the cycle before that.
And it’ll happen again.
If you’re wondering why I’m not running out to buy energy stocks today, it’s because I know better.
A friend recently told me years like this are why you have energy stocks in your portfolio. You ride out years of underperformance in energy stocks so that when that one year hits where everything else falls, energy saves the day!
He’s right!
But it’s also true that long-term, energy stocks don’t typically beat the market.
So, I avoid them.
I don’t need to have an uncorrelated section of the portfolio to save my year.
I only want to own stocks with durable business models and good financials.
I’m not here to speculate about what corner of the market is going to be hot next.
Maybe this is an “old man shouts at clouds” moment in investor. Or maybe, the boom and bust cycle in energy will happen to this generation of investors too.
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