Energy Transfer's AI-Driven Infrastructure Transformation and Its Implications for Long-Term Value

The energy transition is no longer a distant horizon but an unfolding reality, and at its intersection with artificial intelligence (AI) lies a transformative force reshaping midstream energy. Energy Transfer (ET), a titan in the natural gas sector, is redefining its role as both a supplier of critical infrastructure and a pioneer in AI-driven operational innovation. By aligning its midstream capabilities with the surging demand for AI infrastructure, ET is not only securing its relevance in a decarbonizing world but also unlocking new avenues for investor value.

Strategic Partnerships: Powering the AI Economy

Energy Transfer's 2025 strategy is anchored in its ability to supply natural gas to AI data centers, a sector poised for explosive growth. In February 2025, the company inked a landmark 10-year agreement to supply gas for CloudBurst Data Centers' 1.2 GW AI campus, marking its first major behind-the-meter (BTM) deal. This was followed by a partnership with VoltaGrid to fuel 2.3 GW of power for Oracle's AI data centers and a deal to supply the initial 2 GW for Fermi America's Hypergrid AI campus in Texas according to analysis. Collectively, these contracts represent over 5.5 GW of new gas-powered capacity, underscoring natural gas's role as a bridging fuel in the AI infrastructure boom.

Texas has become the epicenter of this strategy, leveraging its robust natural gas infrastructure and favorable regulatory environment. However, ET's ambitions extend beyond Texas. In August 2025, the company secured a 10-year gas transportation agreement with Arizona Public Service (APS) and Salt River Project (SRP) to meet surging electricity demand from data centers in the Southwest. These moves position ET as a linchpin in the AI infrastructure supply chain, capitalizing on the sector's insatiable appetite for reliable, scalable energy.

Federal policy further amplifies this momentum. The Biden administration's Executive Order on advancing AI leadership outlines criteria for private-sector entities to construct "frontier AI infrastructure" on federal land, prioritizing clean energy resources. While ET's gas-powered projects may not align with the administration's clean energy vision, they serve as a pragmatic bridge until renewables can meet the sector's baseload demands. Meanwhile, the Department of Energy has selected four sites for AI data center and energy generation projects, signaling a broader push to integrate energy and AI.

AI-Driven Operational Efficiency: A Dual-Edged Sword

Beyond powering data centers, Energy Transfer is embedding AI into its own operations to enhance efficiency and sustainability. The company employs AI-driven predictive maintenance and digital twin technology to optimize pipeline throughput, reduce unplanned downtime by up to 30%, and cut emissions. These innovations not only improve asset integrity but also lower operational costs, a critical advantage in a sector historically plagued by high capital expenditures.

Digital twin technology, in particular, allows ET to simulate scenarios and make data-driven decisions in real time. This capability is invaluable for managing complex midstream networks, where even minor disruptions can ripple across supply chains. By integrating AI into its operational DNA, ET is transforming from a traditional energy player into a tech-enabled infrastructure provider-a shift that enhances its resilience and adaptability.

Financial Performance: A Compelling Investment Case

Energy Transfer's financials reinforce its strategic pivot. In Q3 2025, the company reported adjusted EBITDA of $3.84 billion, with distributable cash flow of $1.9 billion comfortably covering its $1.14 billion in dividend distributions, yielding a robust 1.7x coverage ratio. This financial discipline is underpinned by a capital expenditure plan of $4.6 billion for 2025, with expectations of $5 billion in 2026, primarily directed toward natural gas projects targeting 15% returns according to analysis.

The company's forward Enterprise Value-to-EBITDA multiple of 7.8x is significantly lower than its historical average and that of its peers, suggesting undervaluation relative to its growth prospects. This is particularly compelling given ET's expanding role in AI infrastructure. For instance, its collaboration with Oracle includes agreements to supply 900,000 cubic feet of natural gas per day, directly linking its revenue stream to the AI sector's expansion.

Moreover, ET's traditional infrastructure projects, such as the $5.3 billion Desert Southwest pipeline and the Mustang Draw natural gas processing plant, are fully contracted under long-term agreements according to financial analysis. These projects provide stable cash flows while diversifying revenue beyond AI-related contracts.

Redefining Midstream Investment Narratives

Energy Transfer's AI-driven transformation challenges conventional midstream investment narratives. Historically, midstream energy has been viewed as a defensive play-reliable but low-growth. However, ET's integration of AI and its alignment with the AI infrastructure boom inject growth into a traditionally stable asset class. By leveraging its midstream expertise to power cutting-edge technology, ET is creating a hybrid model that balances income generation with innovation.

For investors, this dual focus offers a compelling risk-rebalance. The company's low EV/EBITDA multiple suggests it is undervalued relative to its potential, while its dividend coverage ratio ensures income stability. Meanwhile, its AI-driven operational efficiencies and strategic partnerships position it to capture value from the AI economy's ascent.

Conclusion

Energy Transfer's AI-driven infrastructure transformation is a masterclass in adapting to the energy transition. By supplying gas to AI data centers and optimizing its own operations with AI, ET is redefining midstream energy as a dynamic, tech-enabled sector. For investors, this represents a rare opportunity to participate in both the stability of traditional energy infrastructure and the high-growth potential of AI. As the lines between energy and technology blur, Energy Transfer stands at the intersection-a position that promises long-term value creation.