Microsoft CEO Satya Nadella just said something that could be terrible news for Nvidia, but good news for this commodity stock in 2025

The artificial intelligence (AI) revolution will be an ongoing focus for investors, given its transformational potential. But the winners and losers in the market can change quickly in this rapidly evolving field.

In a recent interview, Microsoft (MSFT -0.78%) CEO Satya Nadella mentioned something that could be worrying for 2023 and 2024’s big winner Nvidia (NVDA -2.33%)which has run away with many AI value gains thus far. But Nadella’s statement could be very bullish for a particular commodity whose associated stocks often come with high dividends for passive income.

“Not chip limited” anymore

Earlier this month, Nadella appeared on a podcast with venture capitalists Brad Gerstner and Bill Gurley. The extensive interview of several hours dealt with artificial intelligence. But while the interview was largely positive about the outlook for artificial intelligence broadly, one topic did come up that seemed to put a damper on the mood surrounding Nvidia.

When asked if Microsoft was still limited to Nvidia chips as it was throughout 2024, Nadella noted:

I’m power (limited), well, I’m not chip supply limited … We were definitely limited in ’24. What we’ve told the street is that’s why we’re bullish on the first half of ’25, which is the rest of our fiscal year. And then after that I think we will be in better shape going into 2026 and then we have a good outlook.

Since that statement, Nvidia’s stock has been somewhat weak. It is not surprising. Since 2023, there has been far more demand for Nvidia’s chips than it could supply, leading to large revenue increases and high margins for Nvidia’s graphics processing units (GPUs). And Microsoft has been Nvidia’s largest customer by far, with some estimating that Microsoft accounted for 20% of Nvidia’s sales over the past year.

On recent earnings calls, Microsoft noted that it had been in limited supply; otherwise, growth in the Azure cloud, especially for AI workloads, would have been even faster. So now Nadella’s suggestion that these supply constraints are coming to an end could mean one of three things: Demand for artificial intelligence is slowing; the chip supply is improving; or a little of both happens.

Are AI improvements slowing down? Does Maia ramp?

There have been some rumblings that improvements to large AI language models may be harder to come by and the pace of innovation may slow. These rumors have been dismissed by some major industry players, but they could have an effect on AI chip purchases. After all, if the expected returns on AI experiments and applications are slow to emerge, demand may fall. While Microsoft has plenty of demand from enterprise customers, it’s possible that smaller buyers of GPUs, such as mini-cloud CoreWeave or others that provide capacity for riskier AI start-ups, may see less demand.

Still, most companies in the space are still quite positive about AI demand. Another possibility is that Microsoft sees proprietary Maia accelerators ramping up to larger volumes by mid-2025. Microsoft was well behind the other cloud giants, who have been developing their own custom chips for years and use them in-house to avoid being so dependent on Nvidia’s expensive GPUs. This is why Microsoft buys so many more Nvidia GPUs than its cloud-computing rivals.

However, Microsoft only introduced its Maia accelerators and Cobalt central processing units (CPUs) right at the end of 2023, a year ago. So with a year for Microsoft to refine its design and perhaps ramp up a new production supply, Nadella may just see Maia chips ramp to higher volumes in the new year, easing his chip constraints.

Nadella’s comment about being power-constrained seems to indicate that the demand is still there, at least for Microsoft’s enterprise customer base, and this could be more of a Maia ramp than a slowdown in AI chip demand.

Could Natural Gas Stocks Beat Nvidia in 2025?

As for AI possibilities that could present themselves in 2025, let’s return to the phrase that Microsoft is “power limited.”

It has been claimed that the US will have an unprecedented demand for electricity in the coming years, with the growth of this demand outpacing the growth of the last 10 years, mainly due to AI data centers.

What types of clean energy can quickly meet demand? Renewable energy will undoubtedly play a role here, but renewable energy does not run 24/7, and solar and wind farms can be built in remote locations that need to be connected to the grid.

Additionally, some of the biggest 2024 winners were nuclear stockpiles. Microsoft itself has struck a deal to bring power from the shuttered Three Mile Island facility to power its AI data centers for 20 years. But closed nuclear plants take a long time to get up and running. Three Mile Island itself will not be able to return to service until 2028. So imagine the costs and time delays to get new nuclear plants fully operational. With nuclear-oriented stocks rising higher this year, there could be some disappointment on the way.

Famous hedge fund manager David Tepper also doesn’t think the AI ​​revolution can be satisfied with nuclear power for all these reasons. That leaves only one other option to quickly deploy on existing or easy-to-build facilities: natural gas. Back in September, Tepper warned, “If you’re going to meet the power needs of what they need for AI, you’re going to have to use natural gas.”

That sentiment was echoed recently by Morgan Stanley energy sales analyst Stephen Byrd. Last year, Byrd predicted the increase in nuclear stockpiles, which was going to happen. This year, Byrd expects natural gas stocks to benefit from the inevitable demand to power AI data centers. He even sees new natural gas plants being built on the same land as AI data centers and connected directly to them, thereby bypassing the grid and the lengthy transmission approval process that comes with traditional electricity contracts.

If natural gas sees a new uptick in demand, the sector’s biggest stockpiles could do very well.

The essential natural gas game

If Nvidia is the typical AI stock, EQT Corporation (EQT -1.03%) may be the essential natural gas reserve. EQT has amassed the largest acreage in the Marcellus and Utica shale formations of the Appalachian Basin, home to the largest low-cost natural gas reserves in the United States

With the largest acreage and lowest drilling costs in the Appalachian Basin, EQT has just lowered its break-even costs even further with the acquisition of midstream company Equitrans. The deal closed at the end of July.

The Equitrans acquisition makes EQT the only vertically integrated play in the basin, not only with production, but also with gathering, processing, storage and pipelines. This acquisition should be beneficial in several ways. EQT will now not have to pay a pipeline operator margins to take its gas away, lowering its break-even costs to the lowest of its peer group. In fact, EQT says its break-even price after the acquisition is now about $2 per share. metric million British thermal unit (MMBtu), down from about $2.50 for EQT as a standalone company and roughly equal to the lowest prices. seen for natural gas during the pandemic, as well as during a downturn earlier this year.

So while most natural gas companies need to hedge natural gas prices to protect solvency in a low-price scenario, EQT says it will hedge much less after 2025, when its current hedges roll out. This is because EQT is confident that it can break even at low prices, whereas competitors cannot afford to operate at these levels. Not having as much downside protection means EQT can realize higher prices if the price of natural gas goes up, since it won’t have the upside capped. And if the AI ​​revolution, the coal shift and LNG export markets take off, there could be significantly higher natural gas prices throughout the rest of the decade.

While natural gas prices have nearly doubled from their lows to just under $4 a barrel. MMBtu today, they went over $9 when Russia invaded Ukraine. Trading at just 18 times 2025 earnings expectations, EQT could become one of the biggest “AI winners” in the coming year — perhaps even bigger, in terms of stock valuation, than Nvidia.