Utility companies have long delivered reliable power, a service we’ve come to depend on without question. However, growing demand is putting new pressure on the grid and highlighting the need for expansion. The source of the new demand is hardly a secret – AI technology is booming, and it requires large-scale data centers to support its software and applications. And those data centers are notorious power consumers.
This situation has made it profitable for utility companies to start expanding their generation capacity, as well as to look into new power technologies. Nuclear power, alternative power sources, renewable energy – all are getting more attention as the data center expansion continues. The result is a surge of opportunity for investors in utility stocks.
RBC’s Shelby Tucker, a 5-star analyst rated in the top 2% of the Street’s stock pros, highlights this dynamic in a recent report: “We expect load growth estimates to be revised upwards, following the trends established throughout 2024. Demand, driven by the growth in AI data centers, has combined with the surge in reshoring of manufacturing to drive commercial and industrial load growth to levels not seen since the early 2000s… Ultimately, we expect utilities whose service territories experience heightened interest from large-load customers to continue to update IRPs and increase load forecasts, leading to the potential need for more incremental resources.”
Against this backdrop, Tucker has zeroed in on two utility stocks uniquely positioned to benefit from this trend, thanks to their strategic investments in data center infrastructure. We ran them through the TipRanks database to see what other Street experts make of his choices.
AES Corporation (AES)
The first utility stock we’ll look at is AES, a power company with an extensive portfolio of generating capacity and other assets, as well as a global footprint. From its base in Arlington, Virginia, across the Potomac from Washington, AES manages a network that spans the Americas and extends into Europe and Asia. The company’s focus is on the development and deployment of green power generation technology and capacity, on carbon-free electricity, and on creating the smart grid tech and digital solutions that will meet the ongoing needs of the electric utility sector as a business. What all of this means is that AES has a solid base, commensurate with its $9.5 billion market cap and $12-billion-plus in annual revenues.
