Beyond Tech Stocks: This Utility is Powering the Data Center Boom.

Technology giants like Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) and Meta Platforms (NASDAQ: META) are investing heavily to build new data centers to support their cloud computing and AI growth strategies. Alphabet is nearly doubling its capex plans for 2026 to $175 billion-$185 billion, while Meta is hiking its capex by 73% this year to $115 billion-$135 billion. That's part of the more than $500 billion that large tech companies expect to invest this year.

However, tech companies aren't the only ones capitalizing on the data center spending boom. Utilities are also benefiting from the surge because AI data centers require massive amounts of power to run specialized chips and cooling systems. One utility leading the charge is NextEra Energy (NYSE: NEE). It's building the power generation capacity that data center developers need and developing powered data center hubs to accelerate the sector's growth.

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The power building boom

NextEra Energy originated 13.5 gigawatts (GW) of new generation and battery storage projects last year, its best year ever for new project originations. The company now has 30 GW of projects in its backlog that it expects to develop in the coming years. The utility has now originated 35 GW of projects over the last three years, equivalent to the capacity of the country's fourth-largest public utility.

While not all this power will support data centers, they're a meaningful driver of demand. For example, it signed 11 power purchase agreements and two energy storage agreements with Meta Platforms in December, totaling 2.5 GW of clean power capacity. The company will build several solar energy and battery projects over the next three years to support the tech giant's growing energy needs. That's in addition to the 500 megawatts of power it already supplies Meta Platforms.

Building powered data centers

In addition to building power generation capacity for technology companies, NextEra Energy is beginning to develop data center campuses with associated power generation. For example, it partnered with Alphabet's Google to develop multiple new GW-scale data center campuses with associated generation. Working with Google to develop data centers and power generation can help accelerate the buildout of data centers. The companies are currently developing the first three campuses and are working to identify future locations. This agreement builds on their long-standing partnership. NextEra currently has contracts to supply Google with 3.5 GW of power, which includes plans to restart its dormant Duane Arnold nuclear power plant in Iowa.

NextEra Energy is also working with ExxonMobil to build a data center site powered by natural gas. They're aiming to build a 1.2 GW gas-fired power plant that would utilize Exxon's carbon capture and storage technology to reduce its emissions. They've secured land for the site but haven't yet signed a contract with a data center company.

These moves are part of NextEra Energy's plan to bring 15 GW of new generation online for data center hubs by 2035. That's a conservative estimate. CEO John Ketchum stated on the fourth-quarter earnings call that "I'll be disappointed if we don't double our goal and deliver at least 30 gigawatts through this channel by 2035."

Fueling the AI boom

If you're like most investors, you've probably already invested in tech stocks, including Alphabet and Meta Platforms, to cash in on the data center investment boom. However, tech stocks aren't the only way to invest in this megatrend.

NextEra Energy is leading the charge to accelerate the development of data centers supporting AI. It's adding power to the grid to support rising demand from data centers and developing data center hubs with power generation. These investments help fuel the company's view that it can grow its earnings and dividend at strong rates over the coming decade, which should drive powerful total returns. That makes an investment in the utility stock a compelling way to potentially cash in on the data center building boom.

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