Boaty and I have been kicking this around and we’ve come up with 3 good ways to play utilities:

🚢 The “Picks and Shovels” AI Play: Utilities as the Quiet Winners

Your premise is spot-on: while the market obsesses over AI software and chip stocks, the real, underappreciated winners of the AI arms race are the utility companies powering the data center boom. With AI infrastructure demand outpacing grid expansion, utilities with exposure to major data center regions are positioned for secular growth, yet still trade at value multiples.

Why This Works

• Secular Demand: AI data centers require 4–6x more power than traditional facilities. U.S. data center power demand is projected to double by 2030, with hyperscalers (AMZN, MSFT, GOOG) signing multi-decade power purchase agreements.
• Defensive Valuation: Utilities are still valued as slow-growth, bond-proxy stocks—despite this new, non-cyclical demand surge.
• Earnings Catalyst: Q2/Q3 earnings should reveal above-consensus power sales and, crucially, upward revisions to forward guidance as new contracts are disclosed.

Top Utility Picks for the AI Buildout

1. PPL Corporation (PPL)

• Region: Pennsylvania & Kentucky (Eastern U.S. data center corridor)
• Why PPL?
• Jefferies’ “top utility idea for 2025” due to its excess generation capacity and exposure to the PJM grid, which serves the world’s largest data center market (Northern Virginia).
• Announced multiple new long-term contracts with hyperscalers in 2025, not yet fully reflected in consensus estimates.
• Valuation: Trades at ~14x forward earnings, below the sector average.
• Catalyst: Q2 earnings (late July) expected to show a jump in commercial/industrial volumes and updated guidance reflecting new AI-related contracts.

2. Vistra Corp. (VST)

• Region: Texas (ERCOT grid)
• Why Vistra?
• Largest competitive power generator in Texas, a state seeing the fastest data center growth (Dallas, Austin, Houston).
• Recently acquired 4,000 MW of nuclear capacity and landed major power deals with Amazon and Google.
• Valuation: Still trades at a discount to its sum-of-the-parts value, despite a 200%+ YTD run.