My Top AI Growth Stock to Buy in October

Brookfield Infrastructure (NYSE: BIPC) (NYSE: BIP) isn't the most prominent name when it comes to the artificial intelligence (AI) megatrend. It hasn't developed a popular AI chatbot or the specialized semiconductor chips needed to power AI applications.

However, the technology simply can't thrive without companies like Brookfield Infrastructure. It provides the backbone energy and digital infrastructure required to power AI applications. Its importance to AI, along with some other factors, make it my top AI growth stock to buy this month.

Critical AI infrastructure

Brookfield Infrastructure operates four global platforms focused on utility, energy midstream, transportation, and data infrastructure. The company estimates that more than 60% of its funds from operations (FFO) have exposure to the digitalization trend. That's because AI requires two main factors to thrive: computing power and electricity.

A typical non-AI workload requires the computing power of 5-15 kilowatts (KW) of semiconductor chips per rack. AI workloads, on the other hand, require five times the computing power (20 to 70 KW per rack). Because of that, data centers will need a tremendous amount of electricity in the coming years. Brookfield estimates their power demand will 3x by 2030, growing from 16 gigawatts (GW) to 45 GW.

Brookfield is in an excellent position to capitalize on both sides of this demand driver. It operates critical natural gas midstream infrastructure, like pipelines, processing plants, and gas storage capacity. Natural gas will be an essential fuel to supply power to the grid to help meet the surging demand for electricity from AI and other catalysts, like electric vehicles.

Meanwhile, Brookfield operates utilities that generate electricity from natural gas and distribute gas and electricity to end users. That further enhances its ability to capitalize on growing power demand.

The company also has a growing data infrastructure platform. It's investing heavily in supporting the building of two new semiconductor fabrication facilities in the U.S. with Intel. In addition, it has a rapidly expanding global data center platform.

A cheap way to gain AI-powered upside

The AI megatrend has driven up the stock prices of many obvious AI companies, like AI chip giant Nvidia and cloud computing and AI behemoth Microsoft. As a result, the P/E ratio of the tech-heavy Nasdaq-100 index has risen from 29.5x a year ago to over 32 times right now.

However, the market has yet to realize how much impact AI will have on Brookfield. That's evident in its current valuation. Brookfield Infrastructure trades at about 14.4x its adjusted FFO. That's cheaper than its historical valuation (15.5x) and recent average (16.5x over the last five years), even though the company's future growth prospects are brighter than ever.

Its existing assets (especially gas infrastructure) are growing more valuable than initially assumed. On top of that, its future investment opportunity set is massive, far exceeding its previous expectations.

Brookfield Infrastructure is already growing at a healthy clip without the expected acceleration from AI. Its FFO per share is up 10% over the past year. That's a robust growth rate for a company offering a high dividend yield (currently over 3.5%). That payout, which the company expects to grow at a 5% to 9% annual rate, adds to its strong total return potential.

With its earnings growing at a double-digit rate and its dividend yield over 3.5%, Brookfield's average annualized total returns could be in the mid-teens. There's additional upside potential if its valuation multiple improves.

This under-the-radar AI play could generate spectacular returns

Brookfield Infrastructure isn't the first stock many investors consider when looking at AI. However, given its energy and digital infrastructure assets, it has strong exposure to that trend. Because of that, it should grow briskly in the future. Meanwhile, investors get that growth at a dirt cheap price, enabling them to also lock in an attractive dividend yield.

Add it all up, and Brookfield Infrastructure has a tremendous risk/reward profile, which is why it's my top AI stock to buy this October.

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Matt DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, and Intel and has the following options: long January 2025 $30 calls on Intel, short January 2025 $30 puts on Intel, short November 2024 $45 calls on Intel, and short October 2024 $45 calls on Intel. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends Brookfield Infrastructure Partners and Intel and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.