Bank of America has identified five utility stocks poised for significant growth as artificial intelligence and data center expansion drive unprecedented electricity demand across the United States. The investment bank projects that the US will require 100 gigawatts of effective capacity by 2035, representing a 1.5% annual growth rate compared to just 0.5% between 2015 and 2024. In a high-case scenario, power demand could surge to as much as 300 gigawatts.
Artificial intelligence is emerging as a primary catalyst for this dramatic shift in energy consumption patterns. BofA previously estimated that AI alone could require up to 28 gigawatts of effective capacity by 2026. This surge comes as the economy becomes increasingly power-hungry, driven by multiple factors including the re-shoring of industry, development of data and crypto mining centers, and the electrification of buildings, transportation, and infrastructure.
The five utility companies positioned to capitalize on this trend include Sempra, Northwestern Energy, Pinnacle West, Entergy, and TXNM Energy. Each offers distinct advantages in the evolving energy landscape:
Entergy leads with a potential 3.6% gain based on BofA’s $138 price target. The company has already demonstrated its relevance by participating in AI data center buildouts and expanding the power-charging grid for electric vehicles. The stock has surged over 30% year-to-date in 2024, with expectations that its 15.4-times price-to-earnings ratio will rise over 5%.
Sempra offers the highest upside potential at 13%, with a $94 share target. Goldman Sachs has also highlighted this infrastructure firm, particularly noting its significant capital spending to support data center growth in Texas, a key hub for AI infrastructure development.
Northwestern Energy could jump over 13% to reach a $65 price target, differentiated by improving regulatory treatment in Montana and sector-average earnings growth without equity dilution. Analysts expect upside to materialize from 2026 onwards.
Pinnacle West is projected to climb 4.6% under BofA’s $93 price objective. The bank has previously recommended PNW among high-quality value stocks for hedging against market volatility.
TXNM Energy rounds out the list with a 10% potential increase to reach a $48 price target, offering investors exposure to the growing power demand trend in its service territories.
Key Quotes
There is now evidence that demand growth has returned, driven by the re-shoring of industry, the development of data and crypto mining centers and the electrification of buildings, transportation, and infrastructure
Bank of America analysts wrote this in their Monday report, highlighting the multiple factors converging to reverse two decades of flat power consumption and create new opportunities for utility companies.
We value NWE at an in-line multiple given improving regulatory treatment in Montana and sector-average EPS growth with no equity dilution, with upside likely occurring in 2026 onwards
BofA analysts explained their bullish stance on Northwestern Energy, emphasizing the company’s strong balance sheet and favorable regulatory environment that differentiates it from other small-cap utilities.
Between a more constructive regulatory construct and a strong balance sheet, we see NWE as differentiated relative to other small cap utilities
This assessment from BofA analysts underscores why Northwestern Energy stands out among smaller utility companies, particularly as AI-driven power demand creates growth opportunities that require capital investment and regulatory support.
Our Take
This report reveals how AI’s infrastructure demands are creating unexpected winners in traditional sectors. While investors typically focus on semiconductor companies and AI software developers, the utility sector may offer a more stable way to capture AI growth with lower volatility. The dramatic range between conservative and high-case scenarios (100 GW versus 300 GW) suggests even experts are uncertain about AI’s ultimate power requirements, indicating this trend is still in early stages. The geographic concentration matters significantly—Sempra’s Texas exposure and Northwestern Energy’s Montana operations show that AI data center location decisions will create regional winners and losers. This also raises important questions about grid reliability and whether existing infrastructure can support AI’s explosive growth without significant investment and potential bottlenecks that could constrain the technology’s deployment.
Why This Matters
This analysis highlights a fundamental shift in US energy infrastructure driven by artificial intelligence’s explosive growth. After two decades of declining or stagnant power consumption, the nation faces unprecedented electricity demand that could reshape the utility sector and create substantial investment opportunities.
The AI industry’s energy requirements represent more than just incremental growth—they signal a transformation in how America powers its economy. With AI data centers requiring massive amounts of electricity for training and operating large language models, utility companies are positioned at the intersection of two mega-trends: digital transformation and infrastructure modernization.
For investors, this represents a strategic opportunity to capitalize on AI growth through a traditionally stable sector. Unlike volatile tech stocks, utilities offer dividend income and regulatory protections while providing exposure to AI’s infrastructure needs. For businesses and society, the analysis underscores the critical importance of energy planning as AI adoption accelerates. The potential gap between conservative (100 GW) and high-case (300 GW) scenarios suggests significant uncertainty that could impact AI deployment timelines, data center locations, and ultimately the pace of AI innovation across industries.
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