As the AI boom continues, utilities stocks to watch in 2026

Aerial view of cooling ventilation fans on the roof next to the generators on the lower level of the data center

2025-12-16T16:31:10.226Z

Bank of America believes AI trading will continue to boost the market in 2026.
Analysts are bullish on the sectors driving the boom.
BofA has announced its picks for the top stocks in the utilities sector for the coming year.

Bank of America has identified several top picks in sectors that are poised to benefit from AI in the future and are driving the boom.

BofA analysts said in a note this week that the ongoing AI boom will increase the demand for electricity needed to keep data centers and other key infrastructure running. The bank said AI-driven demand will be the main driver of growth in the energy and utilities sector in the long term.

“Our bullish view on power is supported by strong regional growth led by Texas and the Southwest, with data centers concentrated in major hubs (California, Northern Virginia, Illinois/Wisconsin, Texas) and expanding into contiguous regions (Arizona and Nevada, Indiana and Iowa, broader Texas and Los Angeles, Ohio, Pennsylvania, and North Carolina).”

Below are the bank's top picks in energy and utilities stocks for next year.

1. Utilities Group

Employees of French power transmission system operator RTE are working on refurbishing high-voltage lines in the Alpine region.

ticker: peg

Return in 2025: -6%

Explanation: BofA's top regulated energy and utility stocks are energy holding companies that primarily handle electricity and natural gas distribution.

Public Service Enterprise Group (PSEG) stock price has fallen year-to-date, despite spiking several times throughout 2025. BofA described the company as offering investors the “best of both worlds” with the stability of a regulated utility with proprietary assets for power generation, giving it more upside potential from rising power prices.

The bank has a “buy” rating on the stock and the price target remains unchanged at $95.

2. Alliant Energy Corporation

The Alliant Energy Corporation logo will appear on your smartphone screen.

Illustration by Thomas Fuller/SOPA Images/LightRocket (via Getty Images)

ticker:LNT

Return in 2025: +10%

Explanation: Alliant Energy is a Wisconsin-based natural gas and electricity producer primarily serving the Midwest.

BofA believes this year's strong performance could lead to further upside in 2026, and maintains a bullish price target of $74 and a “buy” rating. Alliant is the first company to be named by BofA analysts as a top undervalued growth opportunity in the sector, saying it could benefit from a presence in a region with a large number of U.S. data centers.

3.Sempra

RTE (Electricity Transport Network) engineers prepare for work on high-voltage power lines near Aix-en-Provence, France, on February 16, 2017. Reuters/Jean-Paul Pellissier

ticker:SRE

Return in 2025: -1%

Explanation: Sempra is an energy infrastructure company that primarily operates in the electricity and natural gas markets. Based in San Diego, the company primarily serves customers in California and Texas, two states with a large number of data centers, as well as parts of Mexico.

Sempra stock is down year-to-date following a recent sell-off. Still, the stock is up 18% over the past six months, and BofA believes it is likely to benefit from the stability of California's data center market and Texas' growth potential.

The company's investment judgment is “buy” and the target price is $99.

4. Southwest Gas

Wilhelmshaven, Lower Saxony: Construction work is underway on the future import terminal for liquefied natural gas (LNG). FSRU — Germany is currently building a liquefied natural gas import terminal in Wilhelmshaven, Lower Saxony.

Sheena Schulte/Photography partnership via Getty Images

ticker: SWX

Return in 2025: +14%

Explanation: Southwest Gas, which produces, transports and distributes natural gas, stands to benefit from rising electricity demand in 2025. The company's stock price has been rising since the beginning of the year, and BofA expects the ongoing data center boom to continue pushing up the stock into 2026. The company maintains a “buy” rating and a price target of $84.

The bank views its key markets of California, Arizona and Nevada as a highly strategic advantage in the data center era.

“While the relative management tenures of both the CEO and CFO are short, execution risk is nevertheless relatively low given the repeatable nature of the core capital projects within the plan (gas pipeline) and the low relative capital expenditures as a percentage of market capitalization and capital expenditures per employee,” the analyst said.

5.Excel Energy

High-voltage power lines near the Golfec nuclear power plant on the Garonne River border between Agen and Toulouse, France, July 18, 2018. Photographed on July 18, 2018. Reuters/Regis Duvigneau — High-voltage power lines can be seen near the Golfec nuclear power plant on the Garonne River border between Agen and Toulouse

Thomson Reuters

ticker:Zel

Return in 2025: +10%

Explanation: Xcel Energy continues to perform well in 2025, with the bank maintaining a buy rating and targeting $84 per share.

Xcel is based in Minneapolis and serves several nearby states, including Colorado, Michigan and North Dakota, with a growing number of data centers.

”[It] BofA forecasts growth of more than 6% to 8% by the end of 2010, with upside from data center development based on a reasonable backlog of 1GW under construction, 2GW in high-probability pipeline, and 20GW in additional pipeline.

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