Got $3,000? 2 No-Brainer Energy Stocks to Buy as Data Centers Scramble for Electricity.
Growing power demand from hyperscale data centers has put the energy sector in the spotlight. Once seen as stable, income-generating assets, energy and utility stocks are attracting investors as data centers scramble to secure power.
Growing demand is boosting regulated utilities in fast-growing regions, including companies like Southern Company (NYSE: SO). Meanwhile, independent power producers benefit more from growing electricity prices, and companies like Constellation Energy (NASDAQ: CEG) are locking in long-term power purchase agreements with hyperscalers.
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Here’s why these two energy stocks look like no-brainer buys for investors with $3,000 to invest.
Southern Company is seeing strong data center growth in its service regions
Southern Company is a diversified energy holding company that owns regulated utilities like Georgia Power Company and Alabama Power Company, natural gas infrastructure (including gas distribution and pipelines), and wholesale power through Southern Power.
The company is seeing robust growth across its service regions, notably Georgia Power and Alabama Power. It’s secured approval (from the EPA) for 10 gigawatts of new power generation resources, including natural gas units, combustion turbines, solar facilities, and grid-scale battery storage.
The company has locked in large-load contracts with data center customers, and these long-term agreements cover 100% of the incremental cost of serving them. Georgia Power entered into a 25-year 3.2-GW contract for OpenAI’s campus in Effingham County, Georgia. The company has also partnered with Alphabet to add 96 MW of capacity to the grid through nuclear plant uprates.
Southern Company is also seeing strong demand for its on-site power generation systems through its subsidiary, PowerSecure, and for wholesale power generation through its subsidiary, Southern Power, which operates natural gas turbines.
For investors seeking exposure to growing electricity demand from AI data centers, Southern Company is an appealing utility in a fast-growing region for serving data centers. That, coupled with its 3.3% dividend yield, makes it an attractive stock for more conservative investors seeking stable exposure to AI’s growing energy needs.
Constellation Energy has locked in numerous long-term power deals with hyperscalers
For more aggressive investors seeking greater exposure to the growing power crunch, Constellation Energy stands out. As a merchant power producer, Constellation owns power generation assets and sells electricity into the market at prevailing prices. When prices surge, Constellation benefits. But if demand wanes and prices fall, Constellation feels that pain too.
To meet growing demand, Constellation is expanding capacity through new projects, uprates and upgrades, and acquisitions. The company has signed deals with numerous major companies, including Microsoft, Meta Platforms, Walmart, Amazon, and Alphabet.
Under Constellation’s 20-year power purchase agreement (PPA) with Microsoft, the company will add 835 MW of new power capacity, including the restart of Three Mile Island Unit 1, which will be renamed the Crane Clean Energy Center. With Alphabet, Constellation will add 890 MW of capacity through nuclear uprates across 11 reactors at 6 nuclear sites.
While Constellation benefits from rising electricity prices, it is taking steps to reduce the volatility of price swings that accompany demand booms and busts. By signing long-term PPAs with hyperscalers, the company locks in a large portion of its energy in multidecade deals that provide predictable cash flows.
If you want more upside exposure to AI’s growing energy demand and can stomach the volatility, Constellation Energy, down 34% over the past year, looks like another solid energy stock to buy to capitalize on this boom.
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Courtney Carlsen has positions in Alphabet, Constellation Energy, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Constellation Energy, Meta Platforms, Microsoft, and Walmart. The Motley Fool has a disclosure policy.
Got $3,000? 2 No-Brainer Energy Stocks to Buy as Data Centers Scramble for Electricity. was originally published by The Motley Fool