AI Data Centers Fuel Utility Stock Boom

The rapid expansion of electricity-hungry artificial intelligence (AI) data centers is creating significant opportunities for utility companies. Corporations are increasingly entering into long-term power purchase agreements to secure energy supplies. Constellation Energy is reactivating a nuclear reactor for Microsoft's data centers, while Meta and Amazon have similar deals.

South Dakota-based Black Hills, a utility company with a market capitalization of $6 billion, recently secured a major contract. The company agreed to sell 590 megawatts of electricity to Google, operated by Alphabet, to power a data center in Cheyenne, Wyoming, until 2048. This agreement is projected to generate approximately $150 million in net income in 2030 alone and $2.4 billion in free cash flow over its lifetime.

This long-term commitment enables Black Hills to confidently invest $1.8 billion in 564 megawatts of new natural gas electricity-generation capacity. This expansion will bring its total potential output to 2.7 gigawatts. The deal highlights how smaller utility players can benefit from the AI boom, especially when data centers are located in markets they already serve.