Utility companies like Constellation Energy, NextEra Energy, and Vistra are reporting concrete earnings growth and raising guidance due to AI data center power demands, backed by multi-year contracts with hyperscalers such as Meta, Microsoft, and Google, though risks exist if AI spending slows.
Utility stocks have been a "buy the story before it shows up" trade for a couple years now. That story just started actually showing up in the numbers. Pitch's been the same for a while: AI data centers are going to need enormous amounts of power, so buy the utilities ahead of that demand. Always felt a little uncomfortable paying today for something that hadn't materialized yet. Constellation Energy reported $7.5B in Q2 sales and raised full-year guidance the same week, 2026 adjusted EPS guidance of $11-12, over 20% annual base EPS growth projected through 2029. That growth's explicitly tied to long-term data center power contracts, including recent deals with Meta and Microsoft, plus higher natural gas plant utilization. Consensus now has CEG's 2026 and 2027 EPS growing 25% and 16% respectively. NextEra Energy is running a $295-325B investment plan through 2032, targeting 6-8% annual earnings growth with roughly a 10% dividend increase planned for 2026, second straight decade of double-digit dividend growth for them. They signed a 25-year power deal with Google to help restart the Duane Arnold Energy Center. Vistra bought Cogentrix Energy's 10 gas-fired plants for $4.7B and signed a 20-year deal to supply Meta with nuclear power from its existing fleet. Same pattern across all three honestly. These aren't speculative capacity bets sitting on a slide deck anymore, they're actual revenue-generating, multi-year contracts with named hyperscaler counterparties, flowing straight into guided earnings growth right now. EIA expects US power use to keep hitting record highs through 2027, and BloombergNEF estimates data centers could eat up a fifth of total US electricity by 2035, up from about 6% today. Real risk though, a lot of this earnings acceleration is probably already priced in after years of people buying ahead of it, and these companies are taking on serious capital commitments, Vistra and Constellation's deals both run tens of billions, betting the AI capex cycle keeps expanding at this pace. If hyperscaler spending slows the way some recent market jitters have hinted at, that growth guidance gets a real test fast. Anyone actually rotating into utilities on this thesis, and does the amount already priced in change how much you're willing to pay here versus a year ago?
The article argues that the massive AI data center buildout is a speculative bubble driven by subsidized pricing rather than real demand, and that the future of AI lies in smaller open-source models at the edge. It highlights negative impacts on energy grids and climate goals, warning that a bubble burst could cause a recession but not the end of AI.
The AI race is increasingly becoming a competition over electricity and infrastructure, as data centers consume massive power and utilities struggle to keep up, shifting focus from software to physical capacity.