12 Best Infrastructure Stocks to Buy According to Hedge Funds

10. Sempra (NYSE:SRE)

Number of Hedge Fund Holders: 33

Sempra (NYSE:SRE) is an energy infrastructure company that operates in the US and internationally. It has three segments; Sempra California, Sempra Texas Utilities, and Sempra Infrastructure. It provides electricity and natural gas services and develops energy infrastructure through these segments.

Morgan Stanley upgraded the company’s price target to $98 from $85 in January. It’s expected to capitalize on Texas’s leading data center activity driven by AI spending. Despite recent challenges managing rising costs and declining California revenues, its stable core business and growth potential offer a compelling risk-reward profile. Its investments in LNG and renewable energy infrastructure underpin its positive investment outlook.

The company sees a massive need for infrastructure upgrades in the US. It estimates that over $600 billion is needed by 2030, and believes that the number could be even higher. Texas, which is a key market for Sempra (NYSE:SRE), is projected to see huge electricity demand growth, around 80% by 2030. This is partly fueled by AI and data centers, which could consume double the current state’s electricity by 2026. The company believes that high-voltage transmission is a prime opportunity, and notes that over 350 gigawatts of generation and storage projects are waiting to connect in Texas.

Sempra’s (NYSE:SRE) subsidiary, Oncor, is crucial to this. Oncor upgraded over 800 miles of transmission lines in FQ3 2024 and saw a 50% jump in requests for new large connections. The Permian Basin is another growth area, with demand projected to quadruple by 2038. This represents a huge investment opportunity (at least $13 billion), and Oncor expects to win a large share of the projects.

ClearBridge Dividend Strategy stated the following regarding Sempra (NYSE:SRE) in its Q2 2024 investor letter:

“Utilities rose largely on merchant power companies serving the data centers powering AI; the rest of the sector, along with real estate, suffered as rate cut expectations were pushed out. One exception was our holding Sempra (NYSE:SRE) — a well-managed and diversified utility holding company. Sempra possesses large franchises in Texas and California, as well as a large LNG business. Sempra is a leading player in each of its markets and all its segments enjoy robust growth outlooks, which should drive high-single-digit growth for the company overall.”