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Electricity demand in the US is rising, driven by everything from data centers to electrified transportation, BofA says.
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By 2035, as much as 300 gigawatts of effective capacity could be needed to power the nation.
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This means upside potential for five national utility stocks, the bank said.
As raw materials flow into infrastructure and technology, demand for electricity in the US is increasing. As the economy becomes increasingly energy-hungry, Bank of America believes momentum is strengthening for five key utility stocks.
“There are now indications that demand growth has returned, driven by the re-shoring of the industry, the development of data and crypto mining centers and the electrification of buildings, transport and infrastructure,” analysts wrote on Monday.
Although power consumption has declined over the past two decades, the bank expects that the U.S. will need 100 gigawatts of effective capacity by 2035. That indicates national annual growth of 1.5%, compared to 0.5% between 2015 and 2024.
However, in BofA’s ‘high case’ scenario, the power demand could require as much as 300 gigawatts.
One of the factors driving this trend is artificial intelligence. The bank previously cited that this could require as much as 28 gigawatts of effective capacity by 2026 alone.
While this will vary dramatically by region, analysts have named five utilities that will benefit from the acceleration: Sempra, Northwestern Energy, Pinnacle West, Entergy and TXNM.
1. Entergy expected to gain 3.6% from current levels, based on BofA’s price target of $138 per share. That’s based on a sum-of-the-parts analysis from 2026 and expectations that the utility’s price-to-earnings ratio, which is 15.4 times larger, will rise by more than 5%.
So far in 2024, the electricity distributor is up more than 30%. It has already played a role in the emerging build-out of AI data centers and helped expand the electric vehicle charging network.
2. Sempra will rise 13% based on the bank’s stock target of $94. Goldman Sachs has similarly touted this infrastructure company, noting the company’s significant spending to support data center growth in Texas.
3. Northwestern energy According to Bofa, it could similarly rise more than 13% to reach a $65 price target.
“We value NWE at a similar level given improving regulations in Montana and industry-average EPS growth without share price dilution, with the upward trend likely to materialize in 2026,” analysts wrote. “Between a more constructive regulatory structure and a strong balance sheet, we view NWE as differentiated from other small utilities.”
4. Pinnacle West will rise 4.6% below BofA’s price target of $93 per share. The bank has previously touted PNW as one of the high-quality stocks worth owning for volatility protection.
5. TXNM energy The stock is expected to rise 10% from current levels and reach a price target of $48 per share.
Read the original article on Business Insider
