Source: Golden Ten Data
Evercore ISI said demand for electricity will increase dramatically with the rise of artificial intelligence data centers. This could present a good investment opportunity for some utility stocks.
Investment bank Evercore ISI said AI data centers will require large amounts of electricity, which could be a good sign for utility stocks. Evercore analyst Dougesh Chopra (Dougesh Chopra) quoted McKinsey as saying that by 2020, data center electricity consumption is expected to account for 6% to 7.5% of the total electricity consumption in the US, up from the current 2.5%. He estimates that the data center and/or AI will account for 50% of the electricity load from natural gas, 25% from solar energy, and 25% from wind.
“In this case, we estimate that by 2030, we will invest between $50 billion and $75 billion to meet electricity generation, transmission, and distribution needs,” Chopra wrote.
He listed a few utility companies that could benefit from increased demand for electricity. Evercore for the Baltimore-based$Constellation Energy (CEG.US)$(CEG.O) has a rating of “outperforming the market”. The company raised its target share price from $184 to $198. Constellation Energy excelled in the utilities sector through nuclear power plants, hydropower, wind energy, and solar power, growing an astonishing 57% in 2024. It has a dividend yield of 0.7%.
Additionally, analysts predict that if Constellation Energy can successfully deploy its nuclear power capabilities to meet the needs of artificial intelligence data centers, earnings per share for the full year 2026 could rise 50%.
$Vistra Energy (VST.US)$Also on Evercore's list, the company gave Vistra a rating of “outperforming the market.” Evercore also raised the power company's target share price from $72 to $79, implying room for an increase of more than 7%. The stock has a dividend yield of 1.2%. Vistra shares rose 84% in 2024. Although Vistra's strength comes mainly from sales of natural gas and retail electricity, Chopra said the company's nuclear capabilities make it a key player in data center power supply.
“Vistra is one of the largest competitive power generation companies in the US, with a production capacity of around 41 gigawatts, including 5.4 gigawatts of nuclear power, making it the second-largest unregulated producer of nuclear energy in the US.” Other utility stocks Evercore is optimistic about include$Public Service Enterprise Group (PEG.US)$und$The AES Corp (AES.US)$.
Editor/jayden