The AI Gold Rush Has an Overlooked Winner

Chipmakers, cloud giants, and software platforms are all basking in the AI spotlight. But there’s a truth hiding beneath the frenzy, which is that none of this technology can function without massive amounts of electricity. And that’s where Dominion Energy steps in.

Key Points

• AI will triple U.S. power demand in the next decade.

• Dominion controls Virginia, the world’s top data-center hub.

• A near 4.5% yield makes it a cheap, steady AI power play.

AI’s Hidden Bottleneck Is Power, Not Processors

AI models aren’t just slightly more power-hungry than traditional computing. They’re exponentially more demanding.

A single ChatGPT query can consume nearly 10 times the electricity of a Google search. Analysts now project that U.S. electricity consumption tied to AI alone could triple over the next decade.

To put that in context, between 2000 and 2020, nationwide electricity use rose just 9%. Between 2020 and 2040, it’s expected to surge 55%, a leap not seen since the post-war industrial boom.

Virginia’s “Data Center Alley”

So why Dominion? Northern Virginia has become the world’s largest data-center hub.

Roughly 70% of global internet traffic passes through the region at some point. Amazon Web Services, Microsoft, Google, and Meta have all expanded server farms there and those facilities will only get hungrier as AI workloads ramp up.

Dominion Energy happens to be the regulated utility with an effective monopoly on supplying electricity in Virginia. That gives it a captive, rapidly growing customer base at precisely the time demand is exploding.

In the second half of 2024, Dominion saw power demand from data centers jump 88%. Unlike a software company that can “scale” instantly, utilities can’t just flip a switch. Dominion has to build new generating capacity, expand transmission lines, and negotiate regulatory approvals. That takes time but it also locks in decades of rate-based capital investments that regulators typically allow utilities to earn steady returns on.

A Utility in Transition With a Tailwind

Dominion hasn’t been a market darling. After a messy stretch of asset sales, a dividend reset, and investor skepticism, the stock trades at a discount. Dominion offers a near 4.5%, a hefty payout even after its dividend cut.

Today, it’s leaner and more focused, having simplified into a plain-vanilla regulated utility. That might sound boring, but boring is exactly what investors want when paired with an unexpected growth catalyst like AI data-center demand.

For long-term investors, Dominion’s appeal is that it combines the stability of regulated utilities with a once-in-a-generation demand surge. It’s unlikely to transform into a hyper-growth stock, but the setup may well support steady earnings growth, higher cash flows, and eventually, dividend hikes down the line.

Why Dominion Could Outperform AI Hype Stocks

Nvidia’s stock has surged 29% this year, while Dominion is up a modest 11%. That gap reflects hype more than fundamentals. At some point, investors may question how much future growth is already priced into AI darlings.

Dominion, in contrast, offers low expectations, a juicy dividend, and a structural growth tailwind that the market hasn’t fully appreciated.