Tapping into the AI Energy Revolution: Why Entergy is the Undervalued 'Toll Booth' of the Future

The AI revolution is not just about algorithms—it's a power-hungry phenomenon demanding a complete overhaul of global energy infrastructure. Goldman Sachs, long a bellwether for financial trends, has reorganized its energy practice to focus on the industrial-scale power needs of next-gen AI systems. As data centers evolve into facilities requiring 600 kW per rack—equivalent to powering 500 U.S. homes—the race is on to build infrastructure capable of meeting these demands. Amid this seismic shift, one overlooked stock stands out: Entergy Corporation (ETR), a debt-free utility giant positioned to profit as a “toll booth” operator on the AI energy superhighway.

Goldman Sachs' AI Energy Play: A Blueprint for Infrastructure Investors

Goldman Sachs' recent analysis paints a stark picture: AI-driven power demand for data centers will surge 160% by 2030, requiring $720 billion in global grid upgrades. Traditional data centers, built for CPUs, are obsolete. New facilities must incorporate liquid cooling, industrial-grade power distribution, and proximity to abundant energy sources—mirroring the shift in industries like aluminum smelting to regions with surplus power.

The firm's reorganization prioritizes three themes:
1. AI Infrastructure as a “Toll Booth”: Companies owning critical energy assets (e.g., grids, LNG terminals) will collect recurring fees as hyperscalers and governments rush to build AI-ready facilities.
2. LNG Exports as a Geopolitical Hedge: The U.S. is becoming the world's “LNG superpower,” with exports set to hit 10 million metric tons annually by 2026—directly benefiting firms with export infrastructure.
3. Onshoring and Reshoring: As manufacturers repatriate production to avoid supply chain risks, energy infrastructure providers gain double-digit growth in industrial power demand.

Entergy: The Undervalued “Toll Booth” Operator

Entergy checks all the boxes for this AI energy boom. Here's why it's a buy now:

1. Debt-Free Financial Fortress

With $1.5 billion in cash and zero net debt (Q1 2025), Entergy's balance sheet is a rarity in the utility sector. Its operating cash flow hit $4.5 billion in 2024—a 60% year-over-year jump—providing a war chest to invest in AI infrastructure without diluting shareholders.

2. Nuclear Power: The Unseen AI Fuel

Nuclear plants are the unsung heroes of the AI era. Their 24/7 reliability makes them ideal for powering data centers, which require uninterrupted electricity. Entergy operates four nuclear plants in the U.S., including the 2,234 MW Grand Gulf plant in Mississippi—a critical asset as hyperscalers like Google and Microsoft expand their AI compute clusters.

3. LNG Export Dominance

Through its 50% stake in the Lake Charles LNG terminal (a joint venture with MidOcean Energy), Entergy is poised to profit as Asian and European buyers turn to U.S. LNG to fuel their own AI initiatives. Goldman Sachs estimates LNG exports could add $400 million/year to ETR's EBITDA by 2026.

4. Strategic Growth Projects

• Delta Blues Advanced Power Station: A $754 million project in Mississippi set to come online in 2026, enhancing Entergy's ability to serve high-demand industrial and data center clients.
• Partnerships with AI Infrastructure Firms: Entergy is collaborating with firms like Cloudburst Group to design energy-efficient data centers near its power plants—a “build-where-the-power-is” strategy.

5. Undervalued at 6.8x Earnings

Despite its growth drivers, Entergy trades at a 6.8x price-to-earnings ratio—a 40% discount to peers like Dominion Energy (D) and NextEra Energy (NEE). Analysts project a potential 100%+ return over 12–24 months as AI energy demand accelerates.

6. Dividend Discipline

With a 2.87% yield and a 9-year dividend growth streak, Entergy offers stability. Its payout ratio of 35% (vs. 65% industry average) leaves room for hikes as cash flow grows.

Risks and Why They're Overblown

• Regulatory Delays: Projects like Delta Blues could face permitting hurdles. However, Entergy's lobbying clout and bipartisan support for energy infrastructure (e.g., the Inflation Reduction Act) mitigate this risk.
• Commodity Price Volatility: Natural gas prices have dipped 10% YTD, but Entergy's fee-based model (e.g., LNG terminal tolls) insulates it from price swings.
• Valuation Skepticism: Bulls argue ETR's stock is cheap because it's overlooked by growth-focused investors chasing flashy tech stocks.

Why Act Now?

The AI energy boom isn't a distant future—it's happening now. Goldman Sachs' $500 billion Stargate Project to build U.S. AI infrastructure will require $50 billion in new U.S. power generation capacity alone. Entergy is the rare stock that benefits from every angle of this shift: nuclear power for reliability, LNG for exports, and partnerships with data center builders.

Final Verdict: Buy Entergy at 6.8x Earnings—A Rare “Toll Booth” Opportunity

Entergy's valuation gap is a gift for investors. With $1.5 billion in cash, a fortress balance sheet, and exposure to every facet of the AI energy boom, it's a rare “buy now, reap later” play. Add this to your portfolio today—before the market wakes up to its true worth.

Actionable Advice:
- Buy ETR shares at current prices (around $70 as of June 2025) for a mix of dividend income and capital appreciation.
- Hold for 2–3 years to capture growth from LNG exports, nuclear power demand, and AI data center partnerships.

The AI revolution isn't just about code—it's about the energy to run it. Entergy is the unsung infrastructure giant set to profit from this shift. Don't miss the ride.