RBC Picks 2 Utility Stocks Powering the Data Center Revolution

As the data center industry continues to boom, driven by the insatiable demand for cloud services and artificial intelligence, utility stocks are poised to reap significant benefits. RBC Bearings Incorporated has identified two utility stocks that are well-positioned to capitalize on this growth: Entergy (ETR) and Southern Co. (SO). Both companies are investing heavily in infrastructure to meet the increasing energy demands of data centers, making them attractive investments in the data center revolution.

Entergy and Southern Co. are strategically located in the Southeast and Midwest regions, where lower power prices and supportive regulatory environments provide a competitive advantage for data center development. Both companies have constructive rate regulations and key stakeholder support in high economic development areas, further enhancing their appeal to data center operators.

To meet the growing energy demands of data centers, Entergy is planning to invest nearly $7 billion annually over the next five years to upgrade its electric grid and expand its clean energy portfolio. This includes investments in renewable energy sources like solar and wind, as well as energy storage solutions. Similarly, Southern Co. is investing $43 billion in the next five years to reduce greenhouse gas emissions, expand renewable energy, strengthen its gas system, and support the Southeast region's fast-growing energy demand.



These investments will help Entergy and Southern Co. meet the growing demand for electricity from data centers while balancing clean energy and grid updates. Both companies are expected to see significant growth in earnings and dividends as they invest in energy infrastructure, positioning them as strong investments in the data center revolution.

Entergy, with a fair value estimate of $123.00 and a 4.22% forward dividend yield, is expected to grow earnings at a rate toward the top half of management's 6%-8% target. This growth will be supported by constructive rate regulation in the US Southeast and a growing energy-hungry customer base. Southern Co., with a fair value estimate of $69.00 and a 3.87% forward dividend yield, is in the process of a dramatic clean energy transformation. Its $43 billion capital investment plan will result in a significant reduction in coal-generated electricity, with the company aiming to retire all but eight coal plants by 2030.



In conclusion, RBC Bearings Incorporated has identified Entergy and Southern Co. as two utility stocks that are well-positioned to benefit from the data center revolution while balancing clean energy and grid updates. These companies are expected to see significant growth in earnings and dividends as they invest in energy infrastructure to meet the increasing demand from data centers, making them attractive investment opportunities for investors seeking exposure to the data center revolution.