DUK, NEE & XEL Win in AI-Driven Surge in Power Demand

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America's largest utility companies are predicting that the demand for electricity from data centers and new technologies like generative AI will skyrocket in the coming years. As a result, American utility companies and regulatory agencies have significantly increased their projections for peak electricity demand over the next decade. It seems that the ultimate destination for AI is electricity, and American utility stocks are poised to reap the benefits of this trend.

Renewable energy giant $NextEra(NEE)$ told investors last month that US electricity demand will grow exponentially, driven primarily by demand from data centers. However, a report released earlier this year by Grid Strategies warned that America's power grid isn't ready for such a surge in demand.

Apart from AI, another growth driver for American utility stocks is their regulation by government agencies, which ensures stable demand, revenue, and cash flow, along with reliable and secure dividend payments.

1.Duke Energy

$Duke(DUK)$ is one of the largest electric power companies in the US, with three main businesses: electric utility and infrastructure, gas utility and infrastructure, and commercial renewable energy. The company's electric business covers 8.2 million retail customers in North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky.

Duke Energy's stock currently offers an annual dividend of $4.10 per share, with a dividend yield of 4.27%, and it boasts an investment-grade credit rating. The company expects its earnings per share to grow by 5%-7% annually until 2027, resulting in a total annual return of approximately 10%.

2.NextEra Energy

$NextEra(NEE)$ is another leading electric utility company in the US, with three business platforms: Florida Power & Light (FPL), the largest electric utility in the country with 5.7 million accounts; Energy Resources, which operates wind and solar energy, natural gas pipelines, transmission lines, and renewable natural gas facilities; and NextEra Energy Partners.

The stock currently offers a dividend yield of 3.21%, and the company expects its earnings per share to grow by 6%-8% annually until 2026, with dividends increasing by 10% per year until at least 2024.

3.Xcel Energy

$Xcel Energy(XEL)$ operates four electric and natural gas utility companies, serving 3.8 million electric customers and 2.1 million natural gas customers. The stock currently offers a dividend yield of 4.09%.

The company actively invests in high-return expansion opportunities, such as replacing coal-fired power plants with wind energy, which will support its earnings per share growth of 5%-7% annually. Combined with annual dividend payments, shareholders can expect a total return of 8%-10%.