Due to their continuous 24/7/365 operations, data centers consume electricity constantly. These operations involve running large numbers of servers, cooling systems, networking equipment, and other infrastructure. The amount of electricity used by data centers varies widely based on size, capacity, efficiency, and geographic location, but demand is always present. The numbers are staggering, as data centers collectively account for a notable portion of global electricity usage. Estimates suggest that data centers worldwide consumed approximately 200 terawatt-hours of electricity in 2020, accounting for around 1% of global electricity demand. Experts think that the figure has increased dramatically since then.
We decided to screen our 24/7 Wall Street utility stock database, looking for the high-yielding stocks that could benefit from the massive increase in electricity use. All are located in geographic regions of the country where many of the current and future AI/data centers are located. All offer stable and dependable passive income, and all five are rated Buy by top Wall Street firms.
Why are we covering utility stocks?
The S&P 500 utilities sector has gained nearly 19% from its low in mid-February and has outperformed the large-cap benchmark index by 3%. Equities will be impacted if the major stock market indices experience a significant decline. However, history shows that stodgy utility stocks are likely to hold their ground much better than high-flying technology stocks, especially those chasing the artificial intelligence mania.
With a product always in demand and demand increasing exponentially, high-yielding utilities may be the best option now for concerned investors who anticipate a potential correction on the horizon.
Black Hills
Black Hills Corp. (NYSE: BKH) traces its roots to 1883, when the Black Hills Electric Light Company was established in Deadwood. This Dividend King is mainly off the radar for many, but it is now among the safest plays and pays a substantial 4.56% dividend yield. Through its subsidiaries, Black Hills operates as an electric and natural gas utility company in the United States.
We love the shares as significant data center construction is occurring in the Dakotas, particularly by Applied Digital Corp. (NASDAQ: APLD), which plans a $3 billion AI data center near Harwood, North Dakota, starting September 2025, and a potential $10-16 billion project east of Toronto, South Dakota. These projects are driven by high demand for AI computing power and leverage the Dakotas’ advantages, including abundant, low-cost energy, large land availability, a stable climate for cooling, and a pro-business environment. However, they have also faced local controversy regarding resource consumption.
It operates in two segments. The Electric Utilities segment generates, transmits, and distributes electricity to approximately 220,000 electric utility customers in:
- Colorado
- Montana
- South Dakota
- Wyoming
It also owns and operates 1,482 megawatts of generation capacity and 9,024 miles of electric transmission and distribution lines.
The Gas Utilities segment distributes natural gas to approximately 1,107,000 customers in:
- Arkansas
- Colorado
- Iowa
- Kansas
- Nebraska
- Wyoming
In addition, the company owns and operates 4,713 miles of intrastate gas transmission pipelines, 42,222 miles of gas distribution mains and service lines, seven natural gas storage sites, approximately 50,000 horsepower of compression, and 515 miles of gathering lines.
Black Hills also constructs and maintains gas infrastructure facilities for gas transportation customers, provides appliance repair services to residential utility customers, and constructs electrical systems for large industrial customers.
Lastly, it produces electric power through wind, natural gas, coal-fired generating plants, and coal at its coal mine near Gillette, Wyoming.
Constellation Energy
This stock has experienced an enormous run higher due to AI/data center geographical proximity. While still an outstanding idea, even though the dividend is only 0.46%, investors may want to look for a pullback before buying shares. Constellation Energy Corp. (NYSE: CEG) is a producer of emissions-free energy and an energy supplier to businesses, homes, and public sector customers across the nation.
The company’s nuclear, hydro, wind, and solar generation facilities have a generating capacity equivalent to powering approximately 16 million homes, providing about 10% of the nation’s clean energy in the United States.
Its segments include:
- Mid-Atlantic
- Midwest
- New York
- ERCOT
- Other Power Regions
Through its integrated business operations, it sells electricity, natural gas, and other energy-related products and sustainable solutions to various types of customers, including:
- Distribution utilities
- Municipalities
- Cooperatives
- Commercial
- Industrial
- Public sector
- Residential customers in markets across multiple geographic regions
Its nuclear fleet has a generating capacity of approximately 22 gigawatts (GWs).
Constellation operates approximately 10 GW of natural gas, oil, hydroelectric, wind, and solar generation assets.
Duke Energy
Duke Energy Corp. (NYSE: DUK) is an American electric power and natural gas holding company headquartered in Charlotte, North Carolina. It is located in a growing part of the country and pays a hefty 3.46% dividend. This is another traditional utility with significant growth potential in the data center sector. Duke Energy is located in an area poised for increased power consumption from these developments.
It operates through two segments:
- Electric Utilities and Infrastructure (EU&I)
- Gas Utilities and Infrastructure (GU&I)
The EU&I segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest.
To develop electricity, Duke Energy uses the following:
- Coal
- Hydroelectric
- Natural gas
- Oil
- Solar and wind sources
- Renewables
- Nuclear fuel
This segment also sells electricity to municipalities, electric cooperative utilities, and load-serving entities.
The GU&I segment distributes natural gas to:
- Residential
- Commercial
- Industrial
- Power generation natural gas customers
The segment also invests in pipeline transmission projects, renewable natural gas projects, and natural gas storage facilities.
The $138 Goldman Sachs price target is almost 14% above the current trading level.
Entergy
Entergy Corp. (NYSE: ETR) is an energy company engaged primarily in electric power production and retail distribution operations in the Deep South of the United States. This top utility stock always makes sense for conservative investors and pays a rich 2.71% dividend. Entergy is a leading utility in the Southeast, and it is poised to benefit from lower electricity costs in the region as hyperscalers (big tech companies) build new data centers there.
It operates in two segments:
- Utility
- Entergy Wholesale Commodities
The Utility segment generates, transmits, distributes, and sells electric power in the City of New Orleans and portions of:
- Arkansas
- Louisiana
- Mississippi
- Texas
The company also distributes natural gas.
The Entergy Wholesale Commodities segment is involved in:
- The ownership, operation, and decommissioning of nuclear power plants located in the northern United States
- Sale of electric power to wholesale customers
- Provision of services to other nuclear power plant owners
- Ownership of interests in non-nuclear power plants that sell electric power to wholesale customers
The company generates electricity from various sources, including gas, nuclear, coal, hydro, and solar. It sells energy to retail power providers, utilities, electric power co-operatives, power trading organizations, and other power generation companies.
Its power plants have approximately 24,000 megawatts of electric generating capacity, which includes 5,000 megawatts of nuclear power.
The company delivers electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi, and Texas.
The J.P. Morgan price target for the shares is $102.
Southern Company
Southern Company (NYSE: SO) is a leading energy company that serves almost 9 million customers through its subsidiaries. This large-cap utility leader pays a solid 3.17% dividend and offers considerable total return potential. Southern Company generates, transmits, and distributes electricity through its subsidiaries and is a key utility in the Southeast, well-positioned to capitalize on increased power demand from AI data centers.
It operates through three segments:
- Gas Distribution Operations
- Gas Pipeline Investment
- Gas Marketing Services
The company also develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity in the wholesale market; and distributes natural gas in Illinois, Georgia, Virginia, and Tennessee, as well as provides gas marketing services, gas distribution operations, and gas pipeline investment operations.
Southern Company serves approximately 8.8 million electric and gas utility customers and offers digital wireless communications and fiber optics services.
BMO Capital Markets has an Outperform rating with a $103 price target for the shares.
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