The rapid growth of artificial intelligence (AI) is putting an unprecedented strain on the power grid. One of the primary concerns is the unpredictable nature of AI demand. Unlike traditional industries, AI companies are experiencing exponential growth, making it difficult for utilities to forecast and plan for energy demand. This uncertainty is further complicated as the regulatory framework governing utilities is also a significant obstacle to addressing the energy crisis. Utilities are required to petition regulators for approval to invest in new infrastructure, which can be a time-consuming and uncertain process. This has led to a situation where utilities are unable to invest in the infrastructure needed to support the growth of AI, exacerbating the energy crisis.
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In an interview with CNBC on December 6, Nicholas Campanella, Senior Equity Research Analyst at Barclays, discussed the growing demand for power to support the increasing needs of data centers and the tech industry. Campanella forecasts that the US would face a shortage of resources to meet this demand, making nuclear power an attractive option. Campanella cited the fact that gas turbines are largely sold out between now and 2029, and limited ability to bring on new renewables between now and 2026-2027. Campanella emphasized that the growing demand for power from data centers and hyperscalers would drive up demand for nuclear energy.
Given the recent surge in their price, Campanella highlighted that investors should still buy stocks in utility and independent power-producing companies involved in nuclear power, citing the growing mismatch between supply and demand for power in the late decade. According to Campanella, utility companies that have nuclear assets are well-positioned to capitalize on this trend, particularly those with early site permits or Combined Operating Licenses. Campanella pointed out that the last nuclear renaissance had left several sites with existing permits, which could be leveraged to expedite the development of new nuclear facilities. He forecasts that additional large-scale and Small Modular Reactor (SMR) commitments will be made in 2025.
The growing energy demands driven by the rapid expansion of artificial intelligence and data centers present opportunities for investors, particularly in utility companies. With that in context, let’s take a look at the 12 best utility stocks to buy according to hedge funds.
A row of utility poles and power lines, showing the reach of the electric utility operations.
Our Methodology
For this article, we used the Finviz and Yahoo stock screeners to find the 40 largest utility companies. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best Utility Stocks to Buy According to Hedge Funds
12. Eversource Energy (NYSE:ES)
Number of Hedge Fund Holders: 33
Eversource Energy (NYSE:ES) is a utility company that provides electricity, natural gas, and water to approximately 4.4 million customers across Connecticut, Massachusetts, and New Hampshire. The company operates through several subsidiaries including Connecticut Light & Power, Yankee Gas Services, Public Service of New Hampshire, NSTAR Electric, and NSTAR Gas.
Eversource Energy (NYSE:ES) is taking significant steps to grow its business and drive long-term growth. The company has a robust capital plan in place, which includes investing nearly $24 billion in its regulated electric, natural gas, and water business through 2028. This investment will mainly focus on transmission and electric distribution infrastructure, enabling the company to meet increasing demand and support the clean energy objectives of its operating states. The company also plans to invest nearly $6 billion in transmission and over $10 billion in electric distribution infrastructure, which will increase electrification capacity and support the integration of clean energy resources.
One of the key initiatives driving Eversource Energy’s (NYSE:ES) growth is its Electric Sector Modernization Plan in Massachusetts. The Electric Sector Modernization Plan was recently approved by the Massachusetts Department of Public Utilities and provides a roadmap for clean energy in the state and unlocks an additional $600 million in distribution investments, which will increase resiliency and interconnect clean energy resources. Eversource Energy (NYSE:ES) is also making progress on its Advanced Metering Infrastructure (AMI) program in Massachusetts, which is critical to enabling a clean energy future for its customers. The company has successfully implemented a new customer billing and information system and will begin installing smart meters later this year.
11. Pinnacle West Capital Corporation (NYSE:PNW)
Number of Hedge Fund Holders: 33
Pinnacle West Capital Corporation (NYSE:PNW), headquartered in Phoenix, Arizona, is the parent company of Arizona Public Service (APS), the largest electric utility in Arizona. The company serves approximately 1.4 million customers across the state. Pinnacle West Capital Corporation (NYSE:PNW) generates electricity through a diverse energy mix, including nuclear, natural gas, and renewable resources.
To support its growing customer base and increasing demand for energy, Pinnacle West Capital Corporation (NYSE:PNW) is investing heavily in its infrastructure and technology. The company has announced plans to expand its generation capacity, including the development of new power plants and the integration of renewable energy sources into its grid. Additionally, Pinnacle West Capital Corporation (NYSE:PNW) is leveraging innovative technologies, such as smart thermostats and virtual power plants, to manage energy demand and optimize its grid operations. For example, the company’s Cool Rewards program, which has over 95,000 enrolled thermostats, has helped conserve nearly 160 megawatts of energy during peak periods.
Pinnacle West Capital Corporation (NYSE:PNW) is experiencing significant growth in demand for its services, driven by the expansion of its customer base and the increasing popularity of Arizona as a destination for businesses and residents. This growth has added new customers, including large commercial and industrial users, such as data centers and manufacturing facilities. The company has a pipeline of over 10,000 megawatts of extra high load factor demand as of Q3, largely represented by data centers, which is expected to drive significant growth in the coming years.
10. Exelon Corporation (NASDAQ:EXC)
Number of Hedge Fund Holders: 34
Exelon Corporation (NASDAQ:EXC), headquartered in Chicago, is one of the largest regulated electric utilities in the United States. The company serves over 10 million customers across Illinois, Pennsylvania, Maryland, Delaware, New Jersey, and the District of Columbia, Exelon Corporation (NASDAQ:EXC) focuses on electricity generation, transmission, and distribution. The company operates a diverse energy mix, including nuclear, natural gas, wind, and solar power.
Exelon Corporation (NASDAQ:EXC) is investing heavily in modernizing its transmission and distribution infrastructure. The company has a planned capital expenditure of $9.7 billion for electric transmission investments through 2027, which will enable it to support increasing demand for electricity, particularly from data centers and other high-density load customers. Exelon Corporation’s (NASDAQ:EXC) subsidiary, ComEd, is experiencing significant growth in data center load, with high-probability load increasing from 6 gigawatts to 11 gigawatts. To accommodate this growth, Exelon Corporation (NASDAQ:EXC) is upgrading its transmission infrastructure, including the replacement of aging wooden poles with steel poles and the installation of new substations and transmission lines.
In addition to its infrastructure investments, Exelon Corporation (NASDAQ:EXC) is committed to maintaining a strong balance sheet and financial discipline. The company has completed its planned long-term debt financing for the year and is pursuing strategic initiatives to drive operational excellence and customer affordability, including the implementation of multi-year plans and the adoption of cost-saving measures.
9. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 36
American Electric Power Company, Inc. (NASDAQ:AEP), based in Columbus, Ohio, is one of the largest electricity producers in the United States with about 29,000 megawatts of diverse generating capacity. The company serves approximately 5.6 million customers in 11 states including Texas, Ohio, Indiana, and Kentucky.
American Electric Power Company, Inc. (NASDAQ:AEP) is strategically focusing on capitalizing on the load growth opportunities driven by Data Center and AI sectors. The company has received customer commitments for 20 gigawatts of load additions through 2029 and has updated its load growth forecast accordingly through 2027. American Electric Power Company, Inc. (NASDAQ:AEP) is now engaging with regulators and stakeholders to ensure that the costs associated with these new loads are fairly allocated to benefit all customers. American Electric Power Company, Inc. (NASDAQ:AEP) has recently filed data center tariffs and large load tariff modifications to address these needs and maintain affordability. By doing so, the company aims to have operational and maintenance discipline to keep customer rates affordable despite rising costs and a growing rate base.
American Electric Power Company, Inc. (NASDAQ:AEP) has introduced a $54 billion capital plan for 2025-2029, representing a 25% increase from its previous five-year plan. This investment is primarily focused on infrastructure and new generation. Furthermore, American Electric Power Company, Inc. (NASDAQ:AEP) is also exploring opportunities for asset monetization and efficiently monetizing tax credits related to its renewable generation and nuclear facility investments.
8. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 37
The Southern Company (NYSE:SO), headquartered in Atlanta, Georgia, is a leading provider of energy and serves approximately 9 million customers in 6 states across the southeastern United States. The company’s portfolio includes electric utilities such as Georgia Power, Alabama Power, and Mississippi Power, as well as natural gas utilities like Atlanta Gas Light. The Southern Company (NYSE:SO) generates electricity using natural gas, coal, nuclear, and renewable sources.
The Southern Company (NYSE:SO) is making significant investments in renewable energy and advanced technologies to meet the growing energy demands while reducing environmental impact. The company’s renewable portfolio includes a mix of solar, wind, and other clean energy sources. Southern Power, the company’s wholesale generation business, is continuously exploring opportunities to add new assets, whether natural gas or renewable, in response to customer demand. The Southern Company (NYSE:SO) is also at the forefront of research and development in carbon capture and sequestration technologies, operating the National Carbon Capture Center for over 50 years.
The Southern Company’s (NYSE:SO) service territories have been actively driving economic development and customer growth, which is benefiting the growth of the company. In Q3, 42 companies either established or expanded operations within the company’s service territory representing capital investments totaling approximately $2.6 billion. This momentum is particularly strong in Georgia, where Georgia Power’s potential load additions and economic development pipeline have grown to over 36 gigawatts by the mid-2030s, with 8 gigawatts already committed.
7. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 46
Duke Energy Corporation (NYSE:DUK), headquartered in Charlotte, North Carolina, is one of the largest energy holding companies in the United States. The company serves over 8.2 million customers across the Carolinas, Florida, Indiana, Ohio, and Kentucky, Duke Energy Corporation (NYSE:DUK) generates power from a diverse energy mix, including nuclear, coal, natural gas, and renewables.
Duke Energy Corporation (NYSE:DUK) is investing heavily in grid hardening and modernization. In 2023 alone, the company invested more than $4 billion in grid enhancements, including targeted undergrounding, pole upgrades, and the deployment of self-healing technology. These investments have not only improved the resilience of the grid but also helped avoid nearly 550,000 customer outages and saved 7 million hours of outage time during recent hurricanes. Looking ahead, Duke Energy Corporation (NYSE:DUK) plans to continue these critical infrastructure investments, with grid investments accounting for half of its $73 billion capital plan over the next five years.
Duke Energy Corporation (NYSE:DUK) is also driving growth through robust economic development and customer additions. The company has seen significant customer growth, adding approximately 75,000 residential customers in the Carolinas and nearly 30,000 in Florida in the first 9 months of 2024. This growth is supported by strong economic development activity, including the signing of letter agreements for 2 gigawatts of data centers.
6. The AES Corporation (NYSE:AES)
Number of Hedge Fund Holders: 47
The AES Corporation (NYSE:AES) based in Virginia, is a global power company that generates, transmits, and distributes electricity across 15 countries in North America, Asia, Europe, South America, Central America, and the Caribbean. The company generates electricity using natural gas, coal, solar, and wind. The AES Corporation (NYSE:AES) portfolio consists of over 31 gigawatts of generation.
The AES Corporation (NYSE:AES) has been at the forefront of the renewable energy transition, with a significant focus on developing and commissioning large-scale renewable projects. This growth is driven by a strong pipeline of projects including a 1.5 gigawatt wind project in Texas. The company has strong relationships with corporate customers, particularly in the technology and mining sectors, driven by its ability to offer customized solutions and deliver projects on time and on budget. The AES Corporation’s (NYSE:AES) strategic partnerships, such as the one with CDPQ, a global investment group, have been pivotal in securing funding and expertise for these projects. The company recently extended its partnership with CDPQ, to support the growth plans of AES Ohio.
AES Ohio also plans to invest more than $1.5 billion from 2024 through 2027 to enhance system reliability and modernize its grid. This investment includes extensive upgrades to transmission infrastructure and the deployment of smart grid technology. Furthermore, the company recently reached a settlement agreement for Phase 2 of its Smart Grid program, which, if approved by the Public Utilities Commission of Ohio (PUCO), will enable investments of over $240 million over a four-year period focusing on modernizing the grid infrastructure through advanced technologies such as automation and improved communication capabilities.
5. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 49
PG&E Corporation (NYSE:PCG), headquartered in San Francisco, is the parent company of Pacific Gas and Electric Company. The company serves approximately 16 million customers in Northern and Central California. PG&E Corporation (NYSE:PCG) generates electricity through a mix of natural gas, nuclear, hydroelectric, and renewable resources.
PG&E Corporation (NYSE:PCG) is actively expanding its capital investment plan to meet the growing demand for energy infrastructure in California. The company recently added $1 billion to its five-year capital plan, bringing the total to $63 billion through 2028. This additional investment is a direct response to the increasing customer demand for electrification, from housing developments to electric vehicle (EV) charging stations, data centers, and commercial projects. The capital is designed to enhance the reliability and resilience of the company’s infrastructure while ensuring that these investments are affordable for customers and accretive to the company’s earnings.
Additionally, PG&E Corporation (NYSE:PCG) is exploring innovative solutions to leverage new load in ways that benefit the grid. One notable example is the partnership with the Open School District and Zoom to deploy the nation’s largest bidirectional electric school bus fleet. This fleet is equipped with vehicle-to-grid technology, allowing the buses to return energy to the grid when not in use.
4. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 49
NRG Energy, Inc. (NYSE:NRG) based in Houston, Texas, is an integrated power company that provides electricity generation and retail energy services. The company operates a diverse energy portfolio, including natural gas, coal, nuclear, solar, and wind assets. NRG Energy, Inc. (NYSE:NRG) operates in the retail energy sector through brands such as Reliant Energy and Direct Energy.
NRG Energy, Inc. (NYSE:NRG) is actively expanding its Virtual Power Plant (VPP) initiatives. The company has announced a strategic partnership with Renew Home and Google Cloud to develop a 1 gigawatt residential VPP in Texas. The VPP will be offering a Home Essentials bundle that includes a Vivint Smart Thermostat, doorbell camera, and professional installation at no cost to customers enrolled in a VPP plan. This initiative aims to enhance customer engagement and retention as well as provide NRG Energy, Inc. (NYSE:NRG) with a flexible and cost-effective asset to manage supply during periods of volatility. The VPP is expected to generate a significant recurring margin, with projections of $110 million annually for a 650-megawatt VPP and over $160 million for a 1-gigawatt VPP, making it a highly profitable and resilient asset.
NRG Energy, Inc. (NYSE:NRG) is also expanding its commercial and industrial (C&I) energy services footprint by incorporating AI into both sales and customer care. This approach aims to increase speed, improve service quality, and reduce costs, making the company’s offerings more attractive to C&I clients. NRG Energy, Inc. (NYSE:NRG) is expanding its product portfolio to include advanced solutions such as load management and reduced carbon options, catering to the growing demand for sustainable energy solutions.
3. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 69
NextEra Energy, Inc. (NYSE:NEE) headquartered in Juno Beach, Florida, is one of the world’s largest producers of wind and solar energy. The company operates through its subsidiaries, Florida Power & Light (FPL) and NextEra Energy Resources, serving over 12 million customers. NextEra Energy, Inc. (NYSE:NEE) company also provides natural gas through its subsidiary Florida City Gas (FCG) and serves about 120,000 residential and commercial customers.
NextEra Energy, Inc. (NYSE:NEE) has been actively expanding its renewable energy portfolio, adding significant capacity in wind, solar, and battery storage. In Q3, the company added approximately 3 gigawatts of new renewables and storage to its backlog, bringing the running four-quarter total to approximately 11 gigawatts. This consistent growth in development is expected to more than double the company’s combined renewable generation portfolio, growing from 38 gigawatts as of Q3 to potentially 81 gigawatts by the end of 2027.
Furthermore, NextEra Energy, Inc. (NYSE:NEE) has entered into strategic framework agreements with major customers, including two Fortune 50 companies and Entergy. These agreements, totaling up to 15 gigawatts of potential new renewables and storage projects will provide NextEra Energy, Inc. (NYSE:NEE) with the flexibility to allocate assets efficiently and align its development efforts with the specific needs of its partners.
2. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 78
Constellation Energy Corporation (NASDAQ:CEG) is the largest producer of carbon-free energy in the United States. The company operates a vast portfolio of nuclear, wind, and solar power plants and supplies electricity to approximately 2 million customers. Constellation Energy Corporation (NASDAQ:CEG) also provides natural gas, energy management, and efficiency solutions to help customers reduce carbon footprints.
Constellation Energy Corporation (NASDAQ:CEG) is focusing on expanding its clean energy capacity to meet the growing demand for renewable energy sources. The company plans to add approximately 1,100 MWs of 24/7 clean energy by 2028, enough to power over one million homes. This expansion will be driven by investments in nuclear energy, including the restart of the Crane facility nuclear plant and the upgrading of existing plants.
Constellation Energy Corporation (NASDAQ:CEG) has recently been awarded a record-setting 10-year, $840 million contract by the U.S. General Services Administration to supply power to over 13 government agencies, including the Social Security Administration, the Department of Veterans’ Affairs, and the National Park Service. By partnering with Constellation Energy Corporation (NASDAQ:CEG), these agencies will benefit from a cost-competitive and reliable supply of nuclear energy, while also reducing their carbon footprint. Constellation Energy Corporation (NASDAQ:CEG) has also been awarded a $172 million Energy Savings Performance Contract to perform energy-saving upgrades at five General Services Administration-owned facilities in the National Capital Region. These upgrades will include LED lighting, weatherization, and new HVAC systems.
1. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 97
Vistra Corp. (NYSE:VST) headquartered in Irving, Texas, is a leading integrated power company that operates in the electricity and natural gas markets. The company serves 5 million residential, commercial, and industrial customers in 16 states and Washington, D.C. through its retail brand TXU Energy. Vistra Corp.’s (NYSE:VST) integrated business model includes generation, commercial, and retail operations.
Vistra Corp.’s (NYSE:VST) management believes that the growing demand for data centers and the increasing need for cloud computing and artificial intelligence presents a significant opportunity for the company to grow its business. The company is taking a multi-faceted approach to capitalize on this opportunity. Vistra Corp. (NYSE:VST) is in detailed discussions with several data center developers and hyperscalers to provide power to their facilities and is exploring various structures, including co-location deals, new build projects, and portfolio approaches. The company’s Comanche Peak nuclear plant in Texas has become an attractive site for data center development due to its speed-to-market advantage and the state’s favorable business environment.
As Vistra Corp. (NYSE:VST) continues to pursue data center development opportunities, the company is also focused on ensuring that its growth is sustainable and responsible. The company’s leadership team recognizes that the growth of data centers will require significant investments in new generation and transmission infrastructure. The company is working closely with stakeholders, including policymakers, transmission and distribution utilities, and local officials, to advance these opportunities and create value for its customers and shareholders.
While we acknowledge the potential of Vistra Corp. (NYSE:VST) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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