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Lee and I discussed one of the most overlooked realities of artificial intelligence. None of it works without electricity. For a while, there was a belief that data centers could simply generate their own power through wind or small localized grids. As Lee quickly pointed out, that idea does not scale. Wind energy cannot reliably power a data center, let alone meet residential heating and lighting demand at the same time.
Why utilities suddenly matter again
We discussed how even large technology companies are being forced to work directly with utilities. Microsoft’s effort to restart Three Mile Island is a perfect example, and notably, it is being done in partnership with a utility, not independently. That reality is why utilities have moved from being an afterthought to becoming a core AI infrastructure investment.
Lee noted that utilities were one of the strongest-performing sectors earlier this year. Traditionally viewed as conservative, income-focused holdings, they suddenly surged as investors recognized the scale of incremental power demand coming from AI. More recently, utilities have pulled back roughly 10% during the broader market drawdown, pushing many names close to oversold levels.
Where the best opportunities are
Lee and I agreed that geography matters. Many of the largest and fastest-growing data centers are concentrated in the Southeast and Eastern United States, making utilities in those regions especially attractive. Among our preferred names is Duke Energy (NYSE: DUK) | DUK Price Prediction, which has significant exposure to fast-growing population centers and enterprise demand.
We also like Southern Company (NYSE: SO), another major Southeastern utility with regulated operations and predictable cash flows. Entergy (NYSE: ETR) stood out as well, particularly because of its footprint across Louisiana and the broader Gulf region, where major new data center construction is already underway. Dominion Energy (NYSE: D) rounded out the list as a high-quality dividend payer with a strong regional monopoly and a yield north of 4%.
The monopoly advantage investors underestimate
I emphasized why utilities occupy such a unique place in the market. Unlike AI software companies, utilities are monopolies within their service territories. There is no competitive bidding war for customers once a utility controls a region. Lee summed it up perfectly by calling utilities the widest business moat in the history of the world. Nobody competes with them once they are established.
That monopoly status makes utilities fundamentally different from AI developers, where six or seven major players are all competing aggressively. Even if AI adoption takes longer than expected, utilities still benefit from secular demand drivers like population growth, extreme weather, and baseline residential and commercial usage.
How to approach buying now
We both agreed that investors should not rush in all at once. Legging into positions makes sense. Start with a partial position, watch how the stock trades, and add on weakness. Utilities are no longer just defensive holdings. The industry’s entire landscape has changed over the last five years, and AI has only accelerated that shift.
The takeaway was straightforward. Utilities are no longer boring. They are essential infrastructure for the AI economy, protected by regulation, supported by dividends, and positioned for long-term demand growth. For investors looking for a more stable way to participate in the AI buildout, this sector deserves serious attention.
Transcript:
[00:00:04] Doug McIntyre: Lee, we’ve talked a lot about the fact that one of the plays, the big AI plays are utilities. Data centers have to have electricity. There was this idea that they were gonna make their own, they’d sort of put a, some sort of wind energy close by and you create your own tiny grid.
[00:00:22] That’s not
[00:00:23] Lee Jackson: wind energy is, doesn’t do power for heating people’s homes or lighting them, let alone a data center
[00:00:31] Doug McIntyre: or they’ll do what Microsoft is doing and that is restart three mile island, which is gonna take right, right. Take. But it, but by the way, they’re doing that with the utility, right? So if, you’re looking at utilities as your AI play, who are you looking at?
[00:00:47] Lee Jackson: Well, I think one thing, and probably some of our viewers noticed it this year, they were on fire this year and it, I mean, it was incredible to see the old stodgy, utilities that have sat there for years and grandmother and, yeah. Orphans accounts. It was not, the hottest sector on Wall Street and the utility index EtF, which just exploded higher, but the utilities got sold off here in this kind of fall draw down that we had, and they’ve drawn back about 10% and they’ve really.
[00:01:21] They’re almost at an oversold level, and I think it makes sense for anybody that thought, Rats, I’m late to the party so I’m not gonna do it. I think there’s some you can look at now and some of the ones that we really like are some of the bigger ones. They’re located in the Southeast or the Eastern United States where a lot of the current data centers sit.
[00:01:41] So we’re pretty big fans of Duke Energy, which is symbol DUK. Alright. We like Southern Company, which is symbol SO. We like Entergy. Quite a bit. they’re, they cover a lot of the south and they’re building, and they cover Louisiana, where they’re building a huge data center in northern Louisiana.
[00:02:04] And another one I think is good to consider, and it’s one of the top dividend pain stocks is Dominion Energy. Oh, yeah. And based in the southeast, the symbol there is D and I think the, because of the, recent pullback, I think the dividends four and a quarter. four forty something in that neighborhood.
[00:02:23] Doug McIntyre: Oh, no, no. You get a lot of good dividends from these and also keep something in mind. Absolutely. Yeah. If you’re a utility, you’re a monopoly for the most part
[00:02:34] Lee Jackson: in your area. You certainly are,
[00:02:35] Doug McIntyre: Right? If you’re Google and you’re open ai, you’re in a business where you’re not in a monopoly at this point, there’s 6, 7, 8 big AI providers.
[00:02:48] I love monopoly stocks. I love Yeah, me too. Once you buy into them, one of the things you know is that they, people are not going to compete with them. The it, the, moat at a utility is the widest business moat in the history of the world. Nobody can it,
[00:03:06] Lee Jackson: it really is. So, and I think those are four good.
[00:03:10] And the, names we throw, I mean, Vistra had a huge run and, but again, it doesn’t pay as much of a dividend. It’s a $300 stock. So the average investor, I mean, when stocks trade in the $300 range, you can’t get a lot of leverage when a hundred shares cost you 30,000 bucks. So some of these other ones are more reasonably priced, like Entergy and Duke and the ones we mentioned.
[00:03:32] And like you said, if everything doesn’t play out with the AI as fast as expected and the power consumption isn’t as great as expected, like next year, it will be the year after, but they’ll still have demand for their product. Yeah, because we have hot summers, we’re gonna have a cold winter.
[00:03:50] I hear some cold weather’s coming our way now, and you can only bet that electric and gas use will be up huge. So yeah, I think it’s something to consider. And also, if you’re not quite ready to buy yet, make a list of stocks that you can follow on your stock screen or whatever you use. Yahoo Finance or whatever is the vehicle for you,
[00:04:11] and keep an eye on ’em. And if you see one of the ones you like, take another 5% dip, then you go in and buy some. And again, you don’t ever have to buy your whole position at once. Buy some leg into it. if you’re gonna buy a thousand, let’s start with 300. Yeah. And then see how it trades.
[00:04:28] If it starts to trade higher, well you can leg in a little bit more and then if it comes back in, you can finish up. But don’t go all in at once. But utilities, you can be an all in for all the time now because the whole landscape for that industry and that sector has totally changed in the last five years.
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