U.S. electric utilities sounded bullish on demand from data centers powering the artificial intelligence boom after striking several supply deals during the second quarter, reinforcing market expectations of sales growth through the year.
Top utilities, including American Electric Power and NextEra Energy, signed contracts in the recently concluded quarter while others highlighted interest from technology companies.
“We started to get some clarity about data center opportunities and the numbers are staggering,” said Timothy Winter, portfolio manager at Gabelli Funds. As of March 31, it owned stakes in six utility firms including PG&E Corp, NextEra Energy and AES Corp.
U.S. utilities, since the start of the year, have raised their 2030 guidance of cumulative data center electricity demand by roughly 50 per cent, said Ben Levitt, associate director of power and renewables, S&P Global Commodity Insights.
“The economic development pipeline over the period that we’ve shared through 2028, data centers represent about 25 per cent of that pipeline. As we get out to 2030 and beyond, that 25 per cent grows,” Duke Energy CEO Lynn Good said on a post-earnings call.
Utilities could see meaningful sales growth and are now well-positioned to meet or exceed long-term growth targets after two years of underperformance, analysts have said.
For the full year, utilities’ earnings are estimated to increase 12.4 per cent versus 10.5 per cent for the overall S&P 500, LSEG data showed.
Over the next couple of quarters, analysts expect utilities to provide updates on capital expenditure plans, as well as base rate cases – a regulatory process required to increase service charges – to help finance energy infrastructure upgrades.
