Consider Transalta Corporation (TAC) as an indirect play on the AI data center boom, leveraging its excess energy capacity in Alberta, Canada. A major data center partnership announcement is rumored to be imminent within the next few months, which analysts believe could significantly increase the company's earnings. For large-cap exposure, view Amazon (AMZN) as an underappreciated AI investment whose AWS division is showing significant strength. A recent 10-12% price hike on its GPU instances signals strong demand and pricing power for its critical AI infrastructure. This makes Amazon a multi-faceted AI play, benefiting from both cloud services and internal automation.

Transalta Corporation (TAC)

• The hosts present Transalta Corporation (TAC) as their number one "undiscovered AI trade", arguing it's a Canadian energy company poised to benefit massively from the AI-driven demand for data centers.
• The Core Thesis: The insatiable need for energy and space for AI data centers is forcing major tech companies (hyperscalers) to look at new regions. Canada, and specifically the province of Alberta, is positioned as the "last super friendly frontier for data centers."
• Why Alberta, Canada?
  • Alberta is described as the "Texas of Canada"—relatively business-friendly and unregulated compared to the rest of the country.
  • It has a surplus of energy. TAC previously overbuilt its energy infrastructure and had to shut down two large plants. These can be brought back online in approximately 12 months, much faster than building new facilities from scratch.
  • The region's cold climate provides a natural advantage for cooling data centers, which can make them up to twice as efficient by using outdoor airflow.
  • Alberta allows for "behind the grid" energy deals, which is highly attractive for data center operators.
• Potential Catalyst:
  • A rumor is circulating that Meta (META) is assessing a massive data center project in Alberta.
  • The hosts believe a major data center announcement involving TAC is "imminent or within the next couple of months."
  • Even if the Meta deal doesn't happen, they believe it's inevitable that other hyperscalers or Canadian data center groups will move into the region.
• Financials & Sentiment:
  • The sentiment is extremely bullish. One host has taken a "big position" in the stock.
  • An unnamed fundamental analyst cited by the host believes TAC could "easily double their earnings on compute" once the AI data center cycle begins in Canada.
  • The stock was previously depressed due to US-Canada tariff issues and its past energy oversupply, but the hosts believe the market is slow to recognize its new potential.
• Risks Mentioned:
  • The hosts repeatedly warn listeners "Do not copy trade us" and to do their own extensive research.
  • Canada is "always late to the game" and has a more challenging regulatory environment than the U.S.
  • The investment is subject to political risks, such as potential tariffs between the U.S. and Canada.
  • The timeline is the biggest uncertainty. If a major hyperscaler deal doesn't materialize soon, the investment thesis may take much longer to play out.

Takeaways

• TAC is presented as an indirect or "picks and shovels" play on the AI revolution, focusing on the critical need for energy.
• The investment is a bet that Alberta, Canada will become a major hub for AI data centers due to its excess energy capacity and favorable climate.
• Investors should watch for news regarding major data center projects in Alberta, particularly announcements from hyperscalers like Meta. The hosts suggest a shareholder meeting in early November could provide more insight.
• The trade has an "asymmetric risk-reward" profile, according to the hosts. The upside is significant if the data center thesis plays out, while the existing business provides a potential floor.

Amazon (AMZN)

• The hosts identify Amazon (AMZN) as another "undiscovered AI trade," arguing that Wall Street has not fully appreciated its position in the AI space despite it being a well-known "Mag 7" stock.
• The Core Thesis: While competitors like Microsoft have captured the AI narrative, Amazon Web Services (AWS) is making powerful moves that demonstrate its strength and pricing power in the AI infrastructure market.
• Key Catalysts & Developments:
  • AWS recently raised its prices for GPU instances by a "meaningful" 10-12%. The hosts see this as a major signal of high demand and AWS's ability to command higher prices for AI computing resources.
  • AWS is innovating with developer-friendly products. They specifically mention a new vector store on Amazon S3, which dramatically lowers the cost and complexity for developers to build AI applications, making the platform more accessible.
  • One of the hosts, a developer, states that AWS is still the "go-to for true nerds" and the easiest cloud platform to work with from a technical standpoint.
• Broader AI Position:
  • Beyond AWS, Amazon is seen as a prime beneficiary of AI, automation, and robotics within its own massive logistics and retail operations, which will lead to huge productivity gains over the next decade.
  • The company has the capital, global infrastructure, and existing client relationships to be a dominant force in AI, even if it is currently perceived as being slightly behind in the race.
• Risks Mentioned:
  • The stock is susceptible to macroeconomic headwinds like tariffs, as seen by its recent price drop. Its massive retail business makes it sensitive to consumer spending and trade policy.
  • Perception risk: The market has perceived Amazon as lagging behind competitors in the AI narrative, which could continue to weigh on the stock's valuation relative to other AI leaders.

Takeaways

• Investors should look beyond the popular AI narrative and consider the fundamental strength of AWS. The recent GPU price hike is a strong bullish indicator for its AI business.
• Amazon is a multi-faceted AI play. It benefits not only from selling AI cloud services via AWS but also from implementing AI and automation in its own vast operations.
• The stock offers exposure to the AI boom but may be undervalued as an AI play compared to peers who have received more media attention. The hosts suggest that the market has not yet "acknowledged" Amazon's full potential here.