The Hidden Winners of the AI Power Crunch: 3 Utilities to Watch

The explosive growth in artificial intelligence (AI) is creating a historic boom in energy demand. Unlike traditional cloud workloads, which required about 5 kilowatts (kW) to 10 kW per server rack, modern AI hardware with high-density GPU clusters requires anywhere from 20 kW to up to 100 kW per rack.

The AI boom has a surprising bottleneck, and it's not chips, models, or cloud capacity, but the electricity required to keep the whole thing running. Grid operators across several key regions are seeing multiyear backlogs for interconnection permits and power equipment.

In Northern Virginia, which is known as "data center alley," data centers already consume roughly 26% of all electricity generated in the state. For investors, utility operators with large footprints in key regions could be hidden winners from the booming AI infrastructure. Here are three utility stocks that you should be watching closely amid this historic power crunch.

Image source: Getty Images.

Constellation Energy boasts the largest nuclear power capacity in the U.S.

Constellation Energy (NASDAQ: CEG) operates as an independent power producer and boasts 22 gigawatts (GW) of nuclear capacity, making it the largest commercial operator of nuclear power in the U.S. A large chunk of Constellation's power generation is located in the PJM Interconnection region, which serves 67 million customers from Illinois to New Jersey, including data center alley.

This geographic advantage was important when it entered into a 20-year power purchase agreement (PPA) with Microsoft in 2024. As part of the deal, Constellation is restarting Unit 1 at Three Mile Island (which has an 835 MW capacity) to supply nuclear power to the hyperscaler. It also entered a similar 20-year PPA with Meta Platforms to provide energy from its Clinton Clean Energy Center in Illinois.

Constellation is appealing because of its large nuclear footprint. That's because nuclear energy provides highly reliable baseload power, which is crucial for hyperscalers seeking uninterrupted, clean energy to meet zero-emissions goals. It also diversified its portfolio through its $26.6 billion acquisition of Calpine, adding over 27 gigawatts of natural gas and geothermal capacity to its fleet in high-demand markets.

Investing in Constellation isn't without risk. Because it operates as a wholesale merchant power producer, the company is vulnerable to regulatory interventions. For example, some consumer advocates have criticized behind-the-meter data center co-location at nuclear plants, arguing it bypasses the grid and shifts grid maintenance costs onto residential consumers.

That said, the stock has declined 35% from its 52-week high and is priced at around 20 times next year's forward earnings. With analysts pricing in 22% compound annual growth in earnings per share over the next three years, Constellation is a top utility provider to consider scooping up today.

Vistra manages a massive fleet of natural gas, nuclear, and an expanding renewable footprint

Vistra Corporation (NYSE: VST) is another major independent power producer, with about 44,000 megawatts of total capacity. Like Constellation, the company operates a merchant power business model selling electricity directly into competitive wholesale markets across 18 states. The company has a diverse energy portfolio comprising natural gas, the second-largest nuclear fleet in the country, along with power from coal, solar, and battery storage.

Early this year, Vistra entered into a 20-year PPA with Meta Platforms for 2,600 MW of power from three of its nuclear plants in the PJM region. The company is also leveraging its legacy coal and brownfield sites to host solar and battery assets linked to Amazon (200 MW Oak Hill solar facility in Texas) and Microsoft (the 405 MW Pulaski solar facility in Illinois).

Vistra has also emerged as the preferred power provider for Helix Investments, a new company formed with KKR, the Kuwait Investment Authority, and Nvidia. With over $10 billion in capital commitments, Helix aims to build data centers and integrated infrastructure to meet surging AI demand.

Like Constellation, Vistra is exposed to regulatory risks and price caps in regions like PJM. That said, the historic power crunch also favors Vistra, with analysts projecting robust growth for it over the next several years.

NextEra benefits from AI upside while offering stability as a regulated utility provider

NextEra Energy (NYSE: NEE) is another appealing stock in the utility sector, with its business split between Florida Power and Light, the largest regulated utility in the United States, and NextEra Energy Resources, the world's largest producer of wind and solar power.

The company has become a key partner for large-scale renewable energy build-outs and boasts a record 35.1 GW renewable and storage pipeline. The company is also deploying utility-scale battery storage capacity to complement solar arrays, helping smooth out intermittent solar power so hyperscalers can reliably run compute clusters while limiting their carbon footprints.

The company also recently partnered with Brookfield Asset Management and the U.S. Department of Energy on a $100 billion AI data center campus in western Kentucky. As part of this, NextEra is expected to build and own 2 GW of natural-gas generation capacity and up to 2.6 GW of battery storage.

NextEra balances the growth in AI-driven power demand with the stability of a regulated utility provider and has a stellar 32-year track record of raising its dividend payout. For investors seeking a more stable utility stock, NextEra offers a lower-volatility play than merchant power producers like Constellation and Vistra.

Courtney Carlsen has positions in Constellation Energy, Meta Platforms, Microsoft, Nvidia, and Vistra. The Motley Fool has positions in and recommends Amazon, Brookfield Asset Management, Constellation Energy, KKR, Meta Platforms, Microsoft, NextEra Energy, Nvidia, and Vistra. The Motley Fool has a disclosure policy.