Forget AI Stocks: This Natural Gas Stock Could Soar on AI Demand

Many AI stocks have soared over the past year amid a surge in demand for AI-related hardware, such as chips. As a result, many top tech companies trade at expensive valuations. That's skewing the risk-reward toward more downside risk than upside potential.

However, AI stocks aren't the only companies that will benefit from the boom. These companies need a tremendous amount of energy to power AI chips and data center cooling systems. That's fueling robust demand for natural gas, which should benefit leading gas producer EQT (NYSE: EQT). Here's why it could soar as AI gas demand accelerates.

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The low-cost leader

EQT has a differentiated strategy. It's the only large-scale, vertically integrated natural gas producer. It has extensive upstream gas production assets in the core of the Appalachian Basin, complemented by strategic midstream infrastructure. The company became the country's only vertically integrated gas producer after completing its transformative acquisition of Equitrans Midstream in 2024.

The company controls over 1 million undeveloped core net acres across Pennsylvania, Ohio, and West Virginia. Additionally, it owns natural gas pipelines, gas processing plants, storage capacity, and other related infrastructure. The company's large-scale resource position in the core of the Basin, along with its extensive integrated infrastructure, makes it one of the country's lowest-cost gas producers at $2 per MMBtu.

Cashing in on gas power demand

AI data centers consume a tremendous amount of electricity. According to an estimate by S&P Global's 451 Research, power demand by U.S. data centers will rise from nearly 62 gigawatts (GW) last year to over 134 GW by 2030. That's driving power companies to race to build new gas-fired generation to meet the surging demand.

EQT is emerging as a leader in supplying additional gas to the power sector. It's signing integrated gas supply and midstream contracts to support large-scale gas power projects, including the 3.6 GW Shippingport Power Station and the 4.4 GW Homer City redevelopment project. Additionally, the company is working on two projects to expand its large-scale Mountain Valley Pipeline (MVP Boost and MVP Southgate) to supply incremental gas to high-demand regions. These projects will enable EQT to grow its gas volumes while also benefiting from additional midstream income.

The gas giant could produce a massive amount of free cash flow over the next several years. EQT estimates it can generate between $10 billion and more than $25 billion in cumulative free cash flow through 2029 at gas prices between $2.75 and $5.00 per MMBtu. It has produced $2.3 billion over the last 12 months at an average price of $3.25 per MMBtu. It can use that money to repay debt, pay dividends, repurchase shares, and make additional acquisitions to further enhance its scale.

The fuel to soar

Shares of EQT have barely budged over the past year. However, the gas stock appears poised to soar in the coming years as gas demand accelerates. That makes EQT a compelling way to cash in on the AI boom without overexposing your portfolio with high-priced AI stocks.

Matt DiLallo has positions in EQT. The Motley Fool has positions in and recommends EQT and S&P Global. The Motley Fool has a disclosure policy.