Could Utility Stocks Be the Next Big AI Winners?

AI has the potential to be a powerful technology. However, access to power will be crucial to the technology's adoption in the future. AI data centers require significantly more electricity compared to those handling traditional workloads due to the specialized chips and cooling systems needed to keep these facilities running at full capacity 24 hours a day, every single day.

As a result, utilities could be big winners in the AI age. They should have considerable opportunities to invest capital into expanding their power generation capacity and the related infrastructure to support their expanded operations. That should empower them to grow their earnings and dividends at faster rates in the future, enabling them to produce powerful total returns for their investors.

Here are some of the utilities in the best positions to cash in on the AI boom.

Image source: Getty Images.

NextEra Energy

NextEra Energy (NYSE: NEE) operates the country's largest electric utility, Florida Power & Light (FPL). It distributes electricity to 12 million people across the state of Florida. Additionally, the company owns one of the country's largest energy infrastructure development companies (NextEra Energy Resources).

The state of Florida is in a strong position to capitalize on the AI data center boom. It has a state sales tax exemption for data centers over 100 megawatts. Meanwhile, FPL has the first and only approved large load tariff in the state. These catalysts should enable the utility to capitalize on growing power demand by data centers in Florida.

Meanwhile, NextEra Energy Resources should be an even bigger beneficiary of the AI power boom. The entity develops and operates a range of clean energy infrastructure, including natural gas pipelines, electricity transmission lines, and various forms of clean power generation capacity, such as natural gas, nuclear, and renewable energy. The company has a strategic relationship with Google to develop nuclear energy and data center campuses. These catalysts support NextEra Energy's view that it can grow its adjusted earnings per share at more than 8% annually over the next decade, while also continuing to increase its 2.8%-yielding dividend.

Dominion Energy

Dominion Energy (NYSE: D) provides regulated electricity services to 3.6 million homes and businesses in Virginia, North Carolina, and South Carolina. The company's electric utility in Virginia will be one of the biggest beneficiaries of the AI boom because the state is one of the world's largest data center markets. The utility has requests to supply 47.1 gigawatts (GW) of power to data centers in the state, a 17% increase over the past year.

The company is investing heavily to build out the necessary power generation capacity and related infrastructure to support the coming surge in power demand. Its current capital investment plan is $50 billion in the 2025 through 2029 time frame, with Dominion Energy Virginia seeing the bulk of that investment. Included in that capital is 50% of the costs to build the $11.2 billion Coastal Virginia Offshore Wind project that Dominion expects to complete in 2026.

Dominion Energy expects its current investment rate to support 5% to 7% annual earnings-per-share growth over the long term, based on 2025's level. The company plans to maintain its current dividend rate (4.5% yield) to allow its growing earnings to lower its dividend payout ratio. However, its dividend should rise with its earnings growth rate once it achieves its more conservative payout target.

Entergy

Entergy (NYSE: ETR) produces, transmits, and distributes electricity to 3 million customers across Arkansas, Louisiana, Mississippi, and Texas. It expects power demand in its operating areas to surge in the coming years, driven by a 13% to 14% compound annual growth rate from industrial customers, such as data centers.

For example, Meta Platforms is building a $10 billion AI data center in Northeast Louisiana, with power supplied by Entergy. The utility is constructing two new gas-fired power plants with a combined capacity of 1.5 GW to power the data center. Entergy secured gas supplies from pipeline giant Energy Transfer to provide fuel for these facilities and others.

Entergy plans to invest $41 billion between 2026 and 2029 on new power generation capacity and related infrastructure. Additionally, the company has signed power purchase agreements with third-party power producers to provide it with additional electricity. For example, NextEra Energy is developing up to 6.2 GW of renewable energy and storage capacity for Entergy over the next few years. These investments support Entergy's expectations that it can deliver more than 8% compound annual earnings-per-share growth through 2029. That should enable the utility to continue increasing its 2.8%-yielding dividend.

Powerful total return potential

Utilities expect to grow their earnings briskly in the coming years as they invest heavily to support surging power demand by AI data centers. When added to their dividend income, these stocks could generate strong total returns for investors in the future. That could make them the next big winners of the AI boom.

Matt DiLallo has positions in Alphabet, Energy Transfer, Meta Platforms, and NextEra Energy. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.