As artificial intelligence (AI) applications expand rapidly, data centers are grappling with soaring energy demands. Natural gas is emerging as a key solution, offering the reliability, scalability, and cost-effectiveness needed to sustain continuous, high-intensity data processing operations.
By integrating natural gas with renewable energy sources, data centers can achieve a balance between sustainability and operational efficiency, solidifying natural gas as a vital component of the sector's future energy strategy. Analysts and investors have highlighted that leading natural gas and oil pipeline companies are already addressing the growing electricity demand from AI-driven data centers, as noted in recent earnings calls.
Prominent energy players such as The Williams Companies Inc. WMB, Kinder Morgan Inc. KMI and Enbridge Inc. ENB are strategically positioned to capitalize on this AI-fueled trend in 2025.
Compute, Storage & Cooling: Energy-Intensive Trio of AI
AI data centers have become significant electricity consumers due to several key factors. Firstly, deep learning and other AI workloads require immense computational power. High-performance processors, such as graphics processing units and tensor processing units, are essential to handle the billions of calculations needed to train large neural networks. This computational intensity drives up electricity usage substantially.
Secondly, data storage systems, particularly those designed for high-speed access and redundancy, represent another major source of energy consumption. These storage systems are critical for rapidly retrieving and processing large datasets but require substantial power to operate efficiently.
Finally, the heat generated by high-performance processors necessitates robust cooling systems to maintain optimal operating temperatures and avoid hardware damage. These cooling systems, while essential, add another layer of electricity consumption, further contributing to the overall energy demands of AI data centers.
Why Natural Gas Pipelines Are Poised for Growth in 2025?
As the adoption of AI data centers accelerates, the electricity demand is expected to grow substantially in 2025, putting significant pressure on existing transmission grids. To accommodate this rising demand, utilities may be compelled to invest in new natural gas power plants, which would increase the need for midstream infrastructure, such as expanded pipeline networks, to ensure a reliable supply of natural gas to these facilities. This could create new opportunities for investment in power generation assets and the associated midstream infrastructure needed to support this growing energy consumption. Consequently, midstream energy companies with extensive natural gas pipeline networks and plans for infrastructure expansion are well-positioned to capitalize on these trends next year.
Midstream Stocks to Watch: Why WMB, KMI, and ENB Stand Out?
WMB Leverages Infrastructure for Energy-Hungry Data Centers
The Williams Companies is observing significant growth in demand for natural gas from power generation, much of which is driven by data centers. These facilities require reliable, large-scale energy sources, and WMB’s infrastructure is well-positioned to deliver.
Notably, the midstream energy giant, carrying a Zacks Rank #3 (Hold), is likely to see earnings growth of 10.6% in 2025. The company is working on several projects, such as the Dalton Lateral expansion near Atlanta, which is designed to meet growing energy needs efficiently. These projects leverage WMB's existing systems, minimizing costs and maximizing returns.
Moreover, WMB is in detailed discussions to provide gas and even partners in joint ventures for power generation dedicated to data centers. These discussions highlight the flexibility of WMB's offerings in adapting to data center energy demands.
KMI Eyes Significant Growth in Data Center Gas Demand
Kinder Morgan sees significant growth opportunities in natural gas infrastructure driven by data center expansion. Data centers are part of the broader power generation demand expected to grow considerably.
The #3 Ranked company has already committed to projects like the Southern Natural Gas South System Expansion 4 and the Gulf Coast Express expansion to enhance its capacity and meet increased demand. The company views this as part of a 25 billion cubic feet per day market growth opportunity over the next five years. In 2025, the company is likely to see earnings growth of 4.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Strategic Gas Investments Fuel ENB's Data Center Support
Enbridge, with a Zacks Rank of 3, emphasizes its extensive gas transmission and storage capabilities as critical to serving data center energy needs.
The company’s investments in regions like Ontario and Utah include direct supply arrangements for data centers. For example, ENB has secured contracts to provide natural gas for 200 MW of data center power in Utah and is exploring an additional 600 MW. This growth aligns with its strategy to address high-demand sectors like power generation and industrial growth. Notably, the midstream player is likely to see earnings growth of 7.3% in 2025.
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