Under the AI craze, the demand for energy storage explodes! EV battery giant Samsung SDI's losses narrow significantly, transforming into energy storage driving stock price up 146% wildly.

South Korean electric vehicle battery manufacturing giant Samsung SDI (Samsung SDI Co.) announced that its actual losses for the first quarter were lower than market expectations, helping its stock price continue to rise sharply due to the recent surge in energy storage demand driven by the AI infrastructure boom. Strong prospects for energy storage systems in North America, Asia, and Europe, as well as relatively optimistic demand for electric vehicles in Europe, have mitigated the negative impact of the significant weakening of US electric vehicle policies. The company stated on Tuesday that its operating losses narrowed significantly by 61% to 155.6 billion Korean won (approximately 106 million US dollars) for the three months ending on March 31. This loss was significantly lower than the analysts' average estimate of around 270.7 billion Korean won in losses. Overall, the improvement in the performance of this electric vehicle company is mainly supported by the demand for AI data center energy storage, advanced manufacturing tax deductions for energy storage systems, high-profit cylindrical batteries, and electronic materials business. Samsung SDI's stock price rose by 7% in early trading on the Seoul stock market, bringing its year-to-date gain to 146%. This increase was driven by the company's large-scale shift towards supplying large-scale AI data centers like "Stargate," as well as strong growth driven by a recent agreement to supply high-nickel nickel-cobalt-manganese batteries (high-nickel NCM) to the German luxury car brand Mercedes-Benz Group AG; these electric vehicle (EV) batteries will be used in the next generation compact and mid-size electric SUVs and certain coupe models of this German luxury car manufacturer. As shown in the figure above, Samsung SDI's stock price has more than doubled this year - the quarterly loss reported by this large electric vehicle battery manufacturer was lower than expected, further boosting the stock price. In other important performance data, Samsung SDI stated that total revenue for the first quarter increased by 12.6% year-on-year to 3.6 trillion Korean won, and the net profit indicator changed from a previous net loss to profit, mainly driven by the strong demand for energy storage systems and significantly increased sales of high-profit cylindrical batteries. The company also benefited from US advanced manufacturing tax deductions related to ESS production, with an overall preliminary estimate amounting to 80.5 billion Korean won; meanwhile, the resilience of semiconductor demand also helped boost its relatively small electronic materials growth business. From an EV headwind to an AI energy storage super trend Under the unprecedented AI boom, the skyrocketing demand for colossal amounts of electricity resources, government incentives, improving economic expectations, and the expansion plans for electric vehicles in Asian countries have strengthened confidence in the booming demand for energy storage systems (ESS). When we talk about "battery energy storage," the vast majority of new energy storage projects choose lithium batteries; the global energy storage technology route has completely locked lithium in the position of "the biggest beneficiary." The latest report from the IEA shows that lithium-ion batteries almost dominate all electric vehicle and new energy storage projects, with the US CECEP Solar Energy Industry Association stating that lithium batteries are the main form of renewable energy backup storage currently, and demand for lithium-ion storage is expected to explode in the next decade. The round-trip efficiency of lithium-ion energy storage is usually above 85%-90%, and the charge-discharge response speed is extremely fast, on the millisecond level of response, making it particularly suitable for peak shaving, frequency regulation, and backup power. Although technologies such as flow batteries, sodium-ion, and compressed air have potential in certain scenarios of "long-term storage," they are far behind lithium in terms of scale, costs, and capital market acceptance, making it difficult to challenge lithium's dominant position in the short to medium term. As global AI data centers, led by Microsoft, Google, and Amazon, continue to expand or build new, these data centers will significantly increase electricity demand, benefiting the lithium industry from the AI trend. This is mainly because, at the level of power systems, large-scale AI data centers significantly increase electricity demand, which in turn exponentially increases the demand for energy storage and flexible power resources. Currently, Samsung SDI's marginal growth drive is fully tilted towards ESS energy storage systems, rather than the long-term reliant demand for EV electric vehicles. The demand for UPS/BBU/energy storage driven by AI data centers, US advanced manufacturing tax deductions for ESS, and high-profit cylindrical batteries together have buffered the pressures from weakening US EV subsidies and slowing global demand for electric vehicles. At the same time, Samsung SDI recently secured a long-term order for high-nickel NCM batteries for Mercedes-Benz, indicating that the demand for high-end EVs in Europe has not disappeared, as Mercedes-Benz will use these batteries for future compact and mid-size electric SUVs and coupe models. Samsung SDI's CFO Kim Yoon Tae stated in a telephone financial results meeting that the ongoing global energy storage trend and the sustained rebound in European demand for electric vehicles should help to further reduce operating losses in the second quarter and may even achieve quarterly profits in the second half of the year. Cho Yong-hui, Executive Vice President of ESS Business, stated that in the ESS sector, the company has secured large-scale orders for the next two to three years, as the company is expanding its customer base from traditional utility companies and data center operators to include microgrid suppliers. A recent research report by the international bank UBS shows that battery energy storage systems are becoming the "second largest growth engine" for lithium demand, with its importance comparable to lithium's importance in electric vehicles. UBS predicts that by 2030, energy storage demand will account for nearly 45% of total battery demand, with its importance shifting from a "marginal variable" to a "core variable." Continued soaring demand for electricity The rapid construction and expansion of global AI data centers led by Google, Microsoft, and Meta highlight the importance of power resource supply, which is why the investment theme of "the end of AI is electricity" is becoming increasingly popular. More importantly, if the path of "self-supply of electricity" by tech giants becomes institutionalized throughout the US and other regions like Europe, it will undoubtedly shift a significant portion of AI capital expenditure towards energy storage, power equipment, and power grid technology. In mid-April, a recent forecast report showed that large US utility companies plan to increase cumulative capital spending by approximately $1.4 trillion over the next five years to upgrade aging power grid systems on a large scale and provide the strongest power expansion resources to support the unprecedented construction and expansion cycle of AI data centers led by tech giants such as Microsoft, Google, and Amazon. Almost at the same time, the Electric Reliability Council of Texas (ERCOT) in the US predicted in a presentation and public statement that peak electricity demand could reach 367,790 megawatts six years from now, which is more than four times the historical peak of 85,508 megawatts in August 2023 a significant increase. The latest warning from Texas electricity grid operators indicates that by 2032, to meet the surging demand for megawatt-scale expansion of large-scale artificial intelligence data centers and population growth, actual electricity demand may double from the recent record demand levels, requiring a capacity equivalent to nearly 300 new nuclear reactors to be developed. The latest forecast reports from ERCOT and US utility companies highlight the fact that the US's aging power grid system is completely unable to keep up with the colossal electricity demand of the AI era, and that US tech giants have actually entered an unprecedented era of "megawatt-level power grab" and "self-supply of power," meaning an unprecedented construction frenzy of AI data centers is accelerating the most scarce electricity supply links, including energy storage, to a new round of super bull market.