Dominion Energy's Strategic Rebalancing: Navigating Renewable Energy and Data Center Growth in a Volatile Market

Dominion Energy (D) finds itself at a crossroads in 2025, balancing the demands of a decarbonizing energy landscape with the explosive growth of data center infrastructure. Recent moves by BMO Capital, which lowered its price target for Dominion to $65.00 from $67.00 while maintaining a "Market Perform" rating, underscore the tension between short-term volatility and long-term value creation. The revised target, based on a mark-to-market valuation and the extension of 45Z tax credits under the Offshore Build Back Better Act, reflects both optimism about Dominion's earnings resilience and caution about regulatory and operational headwinds.

The Data Center Boom and Renewable Energy Alignment

Dominion's 47 gigawatts of new data center power contracts-a 17% increase from the prior year-highlight its strategic pivot to meet surging demand from artificial intelligence and cloud computing. These contracts now account for 27% of Dominion's sales in Virginia, a state poised to become a national hub for data center activity. To support this growth, Dominion has announced a $50 billion capital investment plan for 2025–2029, focusing on transmission, distribution, and generation upgrades.

Critically, the company's renewable energy initiatives are aligning with these data center demands. Dominion's "all-of-the-above" strategy includes 1,400 megawatts of proposed solar and energy storage projects, such as the Bedford Solar and Honeybee Solar initiatives, which will power 350,000 homes. These projects, coupled with investments in battery storage and hydrogen blending, position Dominion to meet Virginia's 2045 clean energy mandate while addressing the energy-intensive needs of data centers. As Dominion CEO Robert Blue noted, the company is "building infrastructure that meets today's demand while laying the groundwork for tomorrow's clean energy transition."

Earnings Resilience and Dividend Appeal

Dominion's third-quarter 2025 earnings of $1.06 per share, exceeding both BMO's and consensus estimates, demonstrate its operational strength. The company narrowed its 2025 guidance to $3.33–$3.48 per share, with the midpoint unchanged at $3.40, reflecting confidence in its ability to deliver a 5%–7% earnings per share compound annual growth rate (CAGR). This stability is a stark contrast to the volatility seen in high-risk AI stocks like C3.ai (AI), which has seen its market cap drop to $2.15 billion amid a 54% share price decline in 2025 and a $116.8 million net loss in Q1.

For income-focused investors, Dominion's 4.55% dividend yield-maintained for 43 consecutive years-offers a compelling alternative to the speculative growth of AI. While Dominion's free cash flow remains negative due to capital expenditures, its dividend safety is bolstered by institutional ownership, which rose 8.27% in the last quarter. The put/call ratio of 0.42 further suggests a bullish outlook, as investors hedge against short-term volatility.

Long-Term Value vs. Short-Term Risks

BMO's revised price target implies a 10.21% upside from Dominion's current price of $58.52, aligning with broader analyst forecasts of $64.49 per share. However, the company faces challenges, including the extension of 45Z credits, which could shift investment priorities toward offshore projects. Additionally, Dominion's recent $1.8 billion expansion of its at-the-market equity offering program signals a reliance on capital raising to fund growth, which may dilute shareholder value.

In contrast, high-risk AI stocks like C3.ai offer potential for outsized returns but come with significant operational and regulatory uncertainties. C3.ai's strategic review and CEO transition highlight the sector's instability, making Dominion's predictable earnings and dividend growth more attractive for risk-averse investors.

Conclusion

Dominion Energy's strategic investments in data center infrastructure and renewable energy position it as a key player in the energy transition. While BMO's revised price target reflects caution about short-term volatility, the company's long-term value proposition-driven by decarbonization goals, earnings resilience, and a robust dividend-remains intact. For investors seeking a balance between income and growth, Dominion offers a compelling alternative to the high-risk, high-reward dynamics of the AI sector.