A Backdoor AI Play With No Tariff Risk And 11.9% Return Potential

Core Insights - The Texas electricity grid, managed by ERCOT, is under significant strain due to increasing demand, with projections indicating a 62% rise in power demand by 2030 [3] - Oncor, Texas's largest utility, has a substantial interconnection queue of 186 GW, which is more than double the current peak demand, indicating a growing need for infrastructure investment [3][7] - Sempra Energy, Oncor's parent company, is set to invest a record $56 billion over the next five years, primarily to enhance transmission and distribution infrastructure to support data centers and AI campuses [6][8] Investment Opportunity - Oncor operates under a regulated model that guarantees a 9% return on infrastructure investments, making it an attractive investment for utility companies [4] - Sempra's investment strategy is expected to lead to increased dividends, with a history of 20 consecutive years of payout increases, averaging 9% annually over the last five years [8][9] - The stock price of Sempra has risen 82% over the past decade, with total returns of 154% when including dividends, showcasing the potential for stable income from this utility investment [9] Future Projections - The planned $56 billion investment will result in hundreds of new substations and thousands of miles of upgraded high-voltage lines, which are essential for meeting the surging electricity demand from tech giants like Microsoft and Amazon [7][8] - Sempra's current dividend yield is 2.9%, with expectations for accelerated dividend growth as the Texas grid adapts to increased AI-related energy needs, potentially leading to annual returns of 11.9% [10] - The utility sector, particularly Sempra, is positioned as a less risky investment compared to more volatile sectors like semiconductors, with a stable demand outlook driven by rising energy needs in Texas [9][10]