Could Utility Stocks Be the Next Big AI Winners?

Core Viewpoint - The utility sector is poised to benefit significantly from the AI data center boom, with companies like NextEra Energy and Dominion Energy leading the charge in expanding their power generation capacity to meet increasing demand [4][12]. Group 1: NextEra Energy - NextEra Energy Resources is expected to gain from the AI power boom, focusing on clean energy infrastructure and maintaining a strategic partnership with Google for nuclear energy development [1]. - The company anticipates an adjusted earnings per share growth of over 8% annually for the next decade, alongside a commitment to increasing its dividend yield of 2.8% [1]. Group 2: Florida's Position - Florida is strategically positioned to benefit from the AI data center boom, supported by a state sales tax exemption for data centers exceeding 100 megawatts and the first approved large load tariff by Florida Power & Light (FPL) [2]. Group 3: Dominion Energy - Dominion Energy serves 3.6 million customers and is set to benefit from a 17% increase in power requests for data centers, totaling 47.1 gigawatts (GW) [6]. - The company plans to invest $50 billion from 2025 to 2029, with significant funding allocated to the $11.2 billion Coastal Virginia Offshore Wind project, expected to be completed in 2026 [7]. - Dominion Energy projects a long-term earnings-per-share growth of 5% to 7% and aims to maintain a dividend yield of 4.5% [8]. Group 4: Entergy - Entergy provides electricity to 3 million customers and anticipates a surge in power demand driven by a 13% to 14% compound annual growth rate from industrial customers, including data centers [9]. - The company is investing $41 billion between 2026 and 2029 to enhance its power generation capacity, including new gas-fired power plants to support a $10 billion AI data center for Meta Platforms [10][11]. - Entergy expects to achieve over 8% compound annual earnings-per-share growth through 2029, while maintaining a dividend yield of 2.8% [11]. Group 5: Total Return Potential - Utilities are expected to experience brisk earnings growth as they invest heavily to meet the rising power demand from AI data centers, potentially leading to strong total returns for investors [12].