The Data Center Play and the Utility That Lost Its Subsidy

On September 9, Bank of America made a move that looked like a simple list update — but revealed where one of Wall Street's largest research operations has shifted its conviction.

Aramark and Clean Harbors were added to BofA's US 1 list. Public Service Enterprise Group was removed.

The US 1 list is not a generic buy list. It is BofA's curated collection of its highest-conviction ideas drawn from Buy-rated American stocks. It carries weight because it signals where institutional money may flow next. PEG remains Buy-rated. It just no longer belongs in the top tier.

The swap tells a story about three companies, two trends, and one structural loss that a regulated utility can't negotiate its way out of.

The Common Thread Beneath Two Additions

Aramark feeds stadiums, hospitals, schools, and correctional facilities. Clean Harbors manages hazardous waste, emergency spills, and industrial recycling. They look like nothing alike.

Both are building businesses inside data centers.

Aramark just launched Nexus, a data center hospitality platform. It serves the round-the-clock crews — engineers, technicians, contractors — who keep these facilities running. Data centers don't need cafeterias like schools do, but they do need food and facilities service for workers on 24-hour shifts in buildings that can never go dark. Aramark's fiscal third-quarter earnings showed $5 billion in revenue with 9% organic growth and record 98% client retention, management highlighted Nexus as a business line that could reshape its longer-term growth profile. The company raised its full-year organic revenue outlook.

Clean Harbors is approaching data centers from the waste side. Its Q2 2026 results showed a record $1.74 billion in revenue — up 12% — with adjusted EBITDA margin expanding 190 basis points to 23.6%. Alongside PFAS remediation and reshoring-driven manufacturing demand, management explicitly named data centers as a new strategic offering within its industrial services platform. The company also locked in a $600 million, ten-year disposal contract with an expanding U.S. manufacturer, demonstrating its ability to stack multi-year revenue from the same capital-intensive buildout.

Both companies are riding the data center infrastructure wave. Neither sells semiconductors or owns server farms. They sell the services that keep these buildings operational. Aramark feeds the workers. Clean Harbors manages what the workers and equipment produce.

At $57, Aramark is up 54% year-to-date but carries $5.6 billion in net debt and operates on thin margins — its adjusted operating margin sits around 4.3%. At $316, Clean Harbors is up 35% year-to-date and trades at a forward P/E of roughly 32x, expensive for an industrial services company. BofA's endorsement says the growth trajectory justifies the price. The risk is that execution slows, cost inflation returns, or the data center buildout hits a funding wall.

The Utility That Lost Its Subsidy

Public Service Enterprise Group is a different kind of animal entirely. It is a regulated utility — New Jersey's primary electric and gas provider — plus an independent fleet of 3,758 MW of nuclear generating capacity. Utilities are supposed to be the safe choice: stable rate base, predictable earnings growth, and a dividend.

The problem is a payment that stopped arriving.

Zero Emission Certificates, or ZECs, were a New Jersey regulatory subsidy designed to keep PSEG's nuclear fleet running by compensating it for the carbon-free electricity it produced. The program ended in May 2025. That subsidy is gone permanently.

The financial impact is visible. PSEG's power generation segment reported a net loss of $8 million in Q2 2026, compared with net income of $253 million in the same quarter the year before.Non-GAAP operating earnings still grew 12% to $0.86 per share, but only because the regulated utility arm, PSE&G, continued its steady climb. The nuclear side is no longer a profit center propped by state policy — it is a cost center that management hopes higher wholesale power prices will eventually offset.

PEG's capital structure makes the gap harder to ignore. The company has $41.5 billion in total debt, $24.4 billion in net debt, and a $24–28 billion capital investment program running through 2030. Its current ratio — the measure of whether it can cover short-term obligations — sits at 88%, below 100%. Compare that to Aramark at 129% and Clean Harbors at 213%. A utility's balance sheet is always heavy, but PSEG's is heavy while simultaneously losing the one policy tailwind that made its nuclear investment economically defensible.

The stock reflects it. PEG is down nearly 10% year-to-date and down 14% over the past 120 days. Management has reaffirmed its 6–8% annual earnings growth target and its $4.28–$4.40 operating EPS guidance for 2026. It plans a base rate filing by year-end. But the ZEC loss is a structural hole, not a quarterly miss. It doesn't recover when rates rise or when the rate base grows.

BofA did not downgrade PEG. It removed it from the list of highest-conviction ideas while keeping the Buy rating intact. That is the difference between "this stock is still serviceable" and "this is no longer our best idea."

What the Swap Is Actually Pricing

A Wall Street list update rarely moves stock fundamentals. What it does is reveal how the people who study these companies full-time have reordered their view of risk and reward.

The old assumption was simple: if you want stability, buy a regulated utility. PEG delivered that story for years — steady rate base growth, a growing dividend, and a nuclear fleet that generated both electricity and state payments. The market accepted it because the mechanics were visible and the regulator approved each step.

The new reality is that a regulated utility's stability can mask structural erosion. PEG is investing $25.5 billion over five years while the subsidy that justified one of its largest asset classes has vanished. The regulated side keeps growing. The generation side is bleeding. And $41 billion in debt service does not care whether earnings growth hits 6% or 8%.

Meanwhile, Aramark and Clean Harbors are not "safe" in the traditional sense. Their margins are thin or their valuations are stretched. But their growth is real and coming from demand that doesn't require regulatory approval to monetize. A factory that reshores to Texas doesn't need a utility commission to generate waste. A data center that operates around the clock doesn't need rate-case approval to feed its crew.

The fork for an investor is this: hold the utility story that lost its best argument, or chase the industrial growth that demands higher conviction in its execution. BofA's list says the latter is the better bet right now.

That doesn't mean Aramark and Clean Harbors are risk-free. Aramark's thin margins leave little room for labor cost shocks. Clean Harbors' 32x forward multiple requires growth to keep compounding. And both are cyclical in ways that PEG's regulated rates never were.

It does mean the "safe" choice has developed a hole in its foundation that won't fill until nuclear economics work without a subsidy — and no one knows if they will. The invoice for that assumption has arrived. PSEG's shareholders just can't see it on the guidance slides yet.