Powering the AI S-Curve: The Infrastructure Bet on Dominion Energy

The central constraint for the AI revolution has shifted. It is no longer about chips or data. The new bottleneck is electricity. As artificial intelligence scales at an exponential pace, its fundamental need for power is creating a regime change for the energy sector. This is not a cyclical surge; it is a multi-year, non-cyclical demand spike that redefines the infrastructure rails for the next technological paradigm.

The scale of this shift is staggering. According to the latest forecast, US data center power needs will triple by 2030 to 134.4 GW. That figure alone signals a sea change. For context, this projected demand could power 75 million American homes around the world by 2030. The growth trajectory is steep: demand is set to climb from 61.8 GW in 2025 to 108 GW in 2028 before hitting that 2030 peak. This isn't just incremental growth. It's a fundamental acceleration that utilities have not seen in decades.

The core challenge is one of speed. The power sector operates on decade-long development cycles for new generation and transmission. AI, by contrast, demands immediate power for rapid scaling. This mismatch creates a critical bottleneck. The metric that matters now is "speed-to-power"-how quickly a data center can access the grid. This dynamic transforms the power industry from a stagnant utility into a strategic enabler. The companies that can build new capacity and manage grid interconnections fastest will own a critical moat.

This sets up a powerful investment thesis. The winners will be the utilities with the capital, regulatory expertise, and existing grid assets to serve this new class of customer. They are no longer just providers of a commodity; they are becoming the fundamental rails for the AI economy. The demand is real, long-term, and underpinned by contracts with the world's most advanced tech firms. For investors, this is about betting on the infrastructure layer of the next paradigm shift.

Dominion's Strategic Positioning: Moats and Metrics

Dominion Energy's advantage is not theoretical. It is rooted in a geographic and operational moat that aligns perfectly with the AI power S-curve. The company's core market is "Data Center Alley" in Northern Virginia, a region that houses more than 35% of all known hyperscale data centers worldwide. This concentration creates a unique, high-value demand cluster. For Dominion, this is not a small portion of its business; it is the engine of its growth. The company's CEO has noted that more than 25% of its sales in Virginia now come from data centers, a figure that continues to climb as it connects more facilities.

This concentrated demand translates directly into Dominion's capital strategy. The company has launched a $50 billion investment plan from 2025 to 2029 to expand both generation and transmission capacity. This is a direct, multi-year bet on the AI power gap. The scale of this commitment is critical. It signals Dominion's ability to move at the speed required by hyperscalers, who "always want to go fast." The investment is not just about adding power; it is about building the grid infrastructure to serve the next wave of AI data centers in its territory.

Financially, the setup is compelling. Dominion is demonstrating the kind of growth that justifies its infrastructure bet. In the third quarter of 2025, operating earnings per share rose 8%. More importantly, management is guiding for annualized operating EPS growth of 5% to 7% through 2029. This provides a clear near-term trajectory. For context, its peer NextEra Energy is expected to see over 8% annual earnings growth through 2035, a benchmark Dominion is actively working to match. The stock's current valuation, with a price-to-earnings ratio of 19.9, sits well below the broader market and the AI-heavy Nasdaq, suggesting the market may not yet be fully pricing in the long-term earnings power of this AI-driven utility.

The bottom line is that Dominion is positioned at the intersection of a non-cyclical demand surge and a company with the capital and regional focus to capture it. Its Virginia moat, its aggressive investment plan, and its track record of growth create a setup where the utility is not just riding the AI wave, but is building the very infrastructure that will carry it forward.

Financial Impact and Valuation: Growth vs. Traditional Utilities

The AI power boom is translating directly to Dominion's financials, creating a rare hybrid: a utility with growth stock characteristics. The company's third-quarter earnings show the impact, with operating earnings per share rising 8% to $1.06. Management is guiding for sustained expansion, projecting annualized operating EPS growth of 5% to 7% through 2029. This growth trajectory is the core of the investment case. It's not the steady, single-digit growth of a traditional utility; it's a multi-year acceleration driven by a fundamental infrastructure need.

This growth is paired with a compelling income stream. The stock currently yields 4.28%, a significant dividend that offers investors a tangible return while the business scales. For income-focused capital, this combination of yield and growth is powerful. It suggests Dominion is building a cash-generating machine that can fund its own expansion while rewarding shareholders.

Valuation highlights the market's hesitation to fully price this shift. Dominion trades at a price-to-earnings ratio of 19.9. That's a notable discount to the AI-heavy Nasdaq-100, with its P/E of 34, and well below the broader S&P 500. The gap suggests the market is still viewing Dominion primarily through a traditional utility lens, not as a growth infrastructure play. This creates a potential mispricing. If the company hits its growth targets, its earnings power could justify a higher multiple over time.

The key financial risk is capital intensity. Dominion's aggressive $50 billion investment plan from 2025 to 2029 is a massive bet. It requires disciplined execution and, crucially, favorable regulatory outcomes to maintain returns on this spending. The company must navigate the lengthy permitting and construction cycles for new generation and transmission while its hyperscaler customers demand speed. Any misstep in managing this capital intensity could pressure margins and delay the return on investment.

The bottom line is a stock caught between two worlds. It offers the stability and yield of a utility, but its growth trajectory is set by the exponential adoption curve of AI. The valuation gap implies the market sees the risk more than the potential. For investors, the bet is on Dominion's ability to execute its plan and capture the AI power premium, turning its capital intensity into a durable competitive advantage.

Catalysts, Risks, and What to Watch

The thesis for Dominion Energy hinges on execution. The near-term catalysts will validate its ability to convert its Virginia moat and $50 billion plan into tangible earnings growth. The most significant near-term milestone is the Coastal Virginia Offshore Wind project, which is on track for full completion in 2027. This project, expected to deliver nearly 3 gigawatts of power, is a key piece of its generation expansion. Its successful commissioning will demonstrate Dominion's capability to deliver large-scale, renewable capacity on schedule, directly supporting the power needs of its data center cluster.

The primary risk to this thesis is the capital intensity of the bet. Dominion's aggressive investment plan requires flawless execution. Regulatory delays or cost overruns on major capital projects could strain the balance sheet and slow the pace of earnings growth. The company must navigate the lengthy permitting and construction cycles for new generation and transmission while its hyperscaler customers demand speed. Any misstep in managing this capital intensity could pressure margins and delay the return on investment.

For investors, the critical metrics to watch are the real-time adoption curve and Dominion's ability to capture it. The first is the power demand surge in its core market. The evidence shows power demand in Virginia surged by 30% due to the rise of AI data centers. This is the foundational metric. Investors should monitor whether this growth rate accelerates or stabilizes, as it directly signals the health of the AI power S-curve Dominion is serving.

The second key metric is the pace of new data center construction in Northern Virginia. This is the ultimate indicator of Dominion's growth engine. The company's ability to secure new interconnection agreements and build transmission capacity in parallel will determine if it can keep up with the exponential adoption of AI. Any slowdown in new data center announcements or construction in its territory would be a red flag for the long-term demand thesis.

The bottom line is that Dominion is now in a validation phase. The Coastal Virginia Offshore Wind project's progress and the sustained 30% power demand surge in Virginia are the near-term signals that will either confirm or challenge the AI infrastructure bet. The risk remains the execution of its massive capital plan, but the metrics are clear: the company is building the rails for a paradigm shift.