Top Utilities for Data Center Growth, According to Jefferies

Investing.com -- Jefferies has identified leading utility stocks positioned to benefit from hyperscaler data center expansion, with several companies securing premium agreements that deliver strong earnings growth while protecting existing ratepayers from infrastructure costs.

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The investment firm highlighted utilities that have established favorable regulatory frameworks and secured significant commitments from major technology companies including Amazon, Meta, and Google. These arrangements are increasingly viewed as models for balancing large-load development with residential customer benefits.

1. NiSource (NI) - Jefferies ranks NiSource as its top pick, citing the company’s deployment of an Indiana "GenCo" unregulated structure that stakeholders and politicians increasingly view as the industry’s gold standard for large-load development.

This arrangement, pending regulatory approval with a non-unanimous settlement in place with Amazon, provides significant premium returns for the utility while delivering concrete benefits to existing users, including savings of approximately $7 per month for residential ratepayers. Management anticipates securing additional hyperscaler agreements which is expected to further improve the company’s effective 10%+ earnings per share trajectory.

In its fourth-quarter 2025 results, NiSource reported adjusted earnings per share of $0.51, which was above analyst forecasts, though its revenue of $1.2 billion fell short of expectations. The company also declared a quarterly dividend of $0.30 per share.

2. Entergy (ETR) - The company is capturing sector-leading earnings per share growth of over 11% (Jefferies estimate, 8%+ guidance), driven by major infrastructure developments from Meta (Louisiana), Google (Arkansas), and Amazon (Mississippi).

The company is exceptionally well-positioned for further data center announcements as these hyperscalers actively opt to cluster their operations within Entergy’s known, favorable regulatory construct. The Entergy Gulf Coast states have largely been immune from the localized data center push-back which has plagued an increasing number of states. This is an increasing area of differentiation in 2026.

Entergy’s fourth-quarter 2025 earnings report showed an earnings per share of $0.51 and revenue of $2.92 billion, both of which were below analyst expectations.

3. Xcel Energy (XEL) - The company offers a relatively low-cost, diversified Midwest footprint that offers the decarbonization that hyperscalers increasingly need. The company offers top-decile rate base and earnings per share growth while trading at a discounted valuation to electric peers. While shares should trade with an element of prospective wildfire liabilities, the magnitude embedded in the stock is simply too high.

Recent news for Xcel Energy includes an analyst upgrade from Argus, which raised its price target and maintained a Buy rating on the stock. The company also appointed Rob Cain as its new senior vice president and chief technology officer.

4. American Electric Power (AEP) - The utility possesses a strong and growing data center pipeline, now 56GW through 2030. Approximately 90% of this incremental load is supported by electric service agreements.

AEP has successfully secured approved large-load tariffs that feature stringent customer protections, including 12 to 20-year commitment terms, 80% to 90% minimum demand charges, and strict termination fees. After many years of regulatory and execution stumbles, the new management team has improved the balance sheet and building confidence.

AEP’s Ohio subsidiary also announced plans for a $4.2 billion transmission infrastructure project to support a new 10-gigawatt data center campus.

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