As artificial intelligence continues to gain momentum, the once-sleepy utilities sector is starting to show signs of life. According to Wells Fargo, the S & P 500 utilities sector saw a 3.6% gain in the first quarter of 2024, but it has already surged more than 8% in the second quarter, driven by excitement around AI and data centers. The growth of AI data centers is expected to drive a significant increase in electricity demand in the U.S. by 2030, creating opportunities for companies in the natural gas sector.
Tech companies are looking for power sources that can back up their use of renewable energy sources, leading to a surge in demand for natural gas. Kinder Morgan CEO Kimberly Dang highlighted the anticipated increase in gas demand from power associated with AI and data centers, emphasizing the need for additional capacity to meet this growing demand.
Several utility companies are expected to capitalize on the AI trend, with Wells Fargo analysts identifying The Williams Cos., TC Energy, and Oneok as potential beneficiaries. The Williams Cos. is currently expanding its capacity to meet rising demand for natural gas, offering investors a dividend of 4.8%. TC Energy, which serves a data center hub in Virginia, offers a dividend of 7.3% and is rated a buy by Wells Fargo. Oneok is also expected to see a boost from the AI trend, with the company working on supplying gas to AI-related gas plant expansions.
Investors looking to capitalize on the AI trend and the increasing demand for natural gas may find opportunities in the utilities sector. Companies like The Williams Cos., TC Energy, and Oneok are well-positioned to benefit from the growth of AI data centers and the resulting surge in electricity demand. With potential for growth and solid dividend yields, these stocks may be worth considering for those looking to invest in the evolving landscape of artificial intelligence and energy consumption. Be sure to stay informed on the latest developments in this space to make informed investment decisions.