2 Energy Stocks With Strong AI Tailwinds

The AI tailwinds have really powered energy stocks over the past year, thanks to a looming surge in demand driven by new AI data centers coming online. Undoubtedly, it’s not just the energy companies with AI data center partnerships in place that have won big. Even the heavy-duty machinery suppliers (think the turbine makers), vital for power production, have benefited greatly. Undoubtedly, the AI tailwind might not be so quick to fade for the energy companies that have gained significant ground in the past year.

If AI electricity use is to rise 300% over the next decade, the utilities might be able to profit profoundly from the AI boom without having to worry about the hefty risks that come with overinvesting in the technology directly. While firms, like NextEra Energy (NYSE:NEE | NEE Price Prediction) do certainly stand out as lower-cost ways to benefit from the AI revolution, investors might wish to broaden their horizons as more firms, especially in nuclear, look to gain some sort of competitive advantage so that they, too, can power the boom that might still be more of a drain on the grid that originally expected.

In any case, here are two energy stocks with strong AI tailwinds and still-modest multiples:

NextEra Energy 

NextEra Energy stands out as a terrific relative value play for investors with shares trading at just 26.7 times trailing price-to-earnings (P/E). The name is also a direct power generation play for investors who want to play the rise in AI-related energy consumption over the coming years.

With a recent $800 Symmetry Energy deal close to being inked, the firm’s natural gas footing looks as impressive as ever. Combined with the reopening of the Duane Arnold nuclear power plant, which is reportedly coming back online by 2029, and NextEra stands out as a long-term power play for those looking for a yield-heavier way to benefit from rising AI power demands. The 2.7% dividend yield is well-covered and is likely to grow, given NextEra Energy’s reputation as a dividend grower that hasn’t missed a year of hikes in several decades.

GE Vernova

GE Vernova (NYSE:GEV) has already gained over 335% since March 2024, and is widely considered to be a major AI power beneficiary, given its role as a turbine maker. Despite the incredible gains and the now stretched multiple, GE Vernova might still have room to run, as renewable energy projects take off in response to the AI boom. 

Whether we’re talking about gas turbines, wind turbines, or hydropower turbines, GE Vernova has seen explosive demand across the board. Until the AI data center boom pulls back, it’s looking likely that GE Vernova will be busy filling orders as demand overwhelms supply and the backlog swells.

Moving into the new year, demand for gas, wind, and hydro turbines could stay off the charts, as power projects move ahead while the grid looks to modernize. At this juncture, it seems like the opportunity in GE Vernova has come and gone, but given the magnitude of earnings beats to come, perhaps 46.7 times forward P/E isn’t an all too outrageous multiple for a secular winner that, in CEO Scott Strazik’s words, is helping the world “thrive and decarbonize.” 

With shares consolidating lower, now down around 14% from its all-time highs, there might be an opportunity to pick up shares after an outstanding quarter failed to move the needle higher. Indeed, it seems expectations got a bit too ahead, causing shares of GE Vernova to be punished for no real good reason. As a long-term power play, I’d stick with the name that’s been getting a ton of orders.