El Nino Heat Wave Fuels HVAC Boom: Goldman Maps The Trade

We have already provided readers with plenty of color on El Niño (see here and here), a weather phenomenon that could pressure harvest yields and potentially reignite food inflation later this year. El Niño tends to raise temperatures and intensify weather extremes, worsening drought in some regions while amplifying heavy rainfall in others.

Now comes the question of how to profit beyond the agri markets. Goldman analysts led by Brian Singer penned a note for clients titled "Heat Waves Could Further Amplify HVAC Demand," in which they laid out dozens of stocks tied to HVAC and power-reliability verticals that stand to benefit as heat waves drive surging cooling demand worldwide.

"We highlight 42 global Buy-rated stocks exposed to HVAC and power reliability verticals that are positioned to benefit from rising cooling demand. We highlight analysis on El Niño and US drought conditions from our Commodities Research and Data Works/Retail teams," Singer said.

Singer noted that HVAC demand rose to 114 million units in 2024, up 7% from a year earlier, while global HVAC demand per capita increased by 6% to 13.9 units per 1,000 people.

Asia remains the largest residential HVAC market, accounting for about 60% of global demand, with Japan, Hong Kong/Macau, and Taiwan leading in market penetration.

Asia, Europe, India, and Bangladesh are set to be among the top markets driving global HVAC demand, given the hot, humid weather backdrop this year.

Singer explained that Europe has become a notable pool of HVAC demand because, even before the heat waves, Germany, the UK, and France were still well below the global average for AC adoption.

Power demand in Spain, France, Germany, and the UK set to rise if HVAC adoption increases. 

Last week, Rory Green, TS Lombard's chief China economist, briefed clients on a weather note titled "Super El Niño: Famine Follows War?"

Green wrote in the note, "In general, El Niño raises temperatures and significantly exacerbates both drought and heavy rainfall. For global macro, it is an inflationary shock via the food price channel – a shock that will likely be compounded by existing war-related high fertilizer costs."

He said within his coverage, "India is the most exposed to both growth and inflation risks, supporting our underweight Indian assets. Brazil and Mexico, too, will receive an inflation impulse."

El Niño Impact Watch:

Singer provided clients with 42 Buy-rated global stocks exposed to HVAC and power reliability, including Carrier, Johnson Controls, Lennox, GE Vernova, Vistra, Quanta Services, Prysmian, Siemens Energy, Midea, Hitachi and Power Grid.

Professional subscribers can read more on El Niño here at our new Marketdesk.ai portal.