AI is Driving Utilities to Spend a Record $240 Billion in 2026. Buy These Stocks to Capitalize on the Power Surge.

Companies are investing heavily in artificial intelligence (AI). That said, AI can't "live" without electricity, so there's been a huge increase in demand for power. In fact, some industry watchers expect the utility sector to spend as much as $240 billion in 2026 to meet AI demand. There are some problems for investors to consider here, and some solutions.

A step change in electricity demand

Electricity demand grew 10% between 2005 and 2025. It is expected to grow by 60% between 2025 and 2045. There are multiple reasons for the increase, but a key factor is artificial intelligence and the data centers that house AI. Given the massive capital investment in AI underway now, utilities have little choice but to ramp up their own investments. This spending is a growth catalyst for utilities.

Image source: Getty Images.

There's just one problem. Regulated electric utilities pass on spending to consumers through rate increases. Rate increases have to be approved by regulators. With inflation running high and electricity costs already on the rise, there has been a pushback against AI investments. That could put pressure on utilities if they aren't allowed to pass on all of their capital investment costs.

The best choice for investors may actually be to focus on companies that can provide power outside of the regulated framework. But you have to be careful as you make your final investment decisions.

Make sure to consider valuation when you buy

For example, Bloom Energy (NYSE: BE) makes hydrogen fuel power cells. These are factory-built and can easily provide dedicated power to an AI data center. The company started 2026 with a $6 billion backlog for its fuel cells, up 2.5x year over year. It is well-positioned to serve AI customers. But there's an even bigger backlog to consider for services, since each new fuel cell comes along with a service contract. Indeed, the total backlog stands at a huge $20 billion.

The only problem is that Bloom Energy stock has risen more than 1,000% over the past year. The company hasn't yet produced sustainable profits, so earnings aren't particularly useful for valuation. However, the price-to-sales ratio is a shockingly high 29x. It appears that Wall Street is already pricing a great deal of future success into Bloom Energy's stock price.

Brookfield Renewable Partners (NYSE: BEP) could be a more attractive option, particularly for dividend investors. The partnership owns a globally diversified portfolio of renewable power assets, including solar, wind, hydroelectric, storage, and nuclear. It sells power to other companies under long-term contracts. AI is expected to be a big demand driver, noting that the company already has contracts to sell power to Microsoft (NASDAQ: MSFT) and Google.

The distribution yield is roughly 4.5%, and the goal is to increase the distribution by 5% to 9% annually. Given the partnership structure, earnings aren't particularly useful here, either. But the P/S ratio is a far more reasonable 1.6x. And investors get to collect a growing income stream along the way. Brookfield Renewable's units are up around 35% over the past year.

A middle ground option is NextEra Energy (NYSE: NEE). It is one of the world's largest utilities, but it also has a large and growing renewable power business. The renewable power business sells power under long-term contracts, as does Broofield Renewable. The stock is up 25% over the past year, and its 22.5x price-to-earnings ratio is below its five-year average of 27x. (For reference, the P/S ratio is 6.6x) While the stock doesn't look cheap, per se, it looks reasonably priced compared to its own history.

Looking forward, NextEra Energy is leaning into AI and data centers with the proposed acquisition of Dominion Energy (NYSE: D). Dominion operates in one of the world's largest data center markets, Virginia. That said, the company's growth engine is most likely to be contracted renewable power. Overall, NextEra expects earnings to grow at around 9% a year after the acquisition, with dividends likely to grow at around 6% a year. The yield is around 2.8%.

Plenty of options, but make sure you are selective

Bloom Energy is a great business and well-positioned to benefit from AI's growth. The problem is that Wall Street is well aware of the story and has priced the stock accordingly. Most investors will likely be happier with Brookfield Renewable or NextEra Energy. They are each set to benefit from AI's growth, but have more reasonable valuations and provide an instant return via reliable dividends.

Reuben Gregg Brewer has positions in Brookfield Renewable Partners. The Motley Fool has positions in and recommends Bloom Energy, Microsoft, and NextEra Energy. The Motley Fool recommends Brookfield Renewable Partners and Dominion Energy. The Motley Fool has a disclosure policy.