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Due to their continuous operations, data centers consume electricity constantly. These operations involve running large numbers of servers, cooling systems, networking equipment, and other infrastructure. The amount of electricity that data centers use varies widely based on size, capacity, efficiency, and geographic location, but the demand is always there. This constant demand from data centers is one of the reasons many on Wall Street remain positive on recession-resistant utility stocks. This ever-present demand, and its potential to increase, is evidenced by the International Energy Agency, which expects data centers to use up to 21% of global energy by 2030.
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Goldman Sachs remains very positive on the top utility stocks despite the strong run in 2024.
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If the Federal Reserve does lower interest rates later in 2025, utility stocks will benefit.
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The recent market pullback has put some of the top companies in the sector back in a sweet spot to buy.
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Large hyperscale data centers, which are increasingly common, require the power of 100 megawatts or more, equivalent to the annual electricity consumption of around 350,000 to 450,000 electric cars. This skyrocketing demand is only expected to continue as the adoption of AI continues to grow. A significant portion of data center energy consumption is attributed to cooling systems that maintain optimal operating temperatures. Big tech will continue to find solutions for this issue. Of the Global Industry Classification Standard’s 11 stock sectors, utilities are considered one of the most recession-resistant. That is because the power they generate is always in demand regardless of the state of the business cycle.
We screened the Goldman Sachs utility stock analysis, and four top companies among the industry’s leaders are Buy-rated. All make sense for growth and income investors worried about the impact of tariffs (which is relatively de minimis in the sector) and the potential for a recession later this year or in 2026.
Why are we covering utility stocks?
History shows that stodgy utility stocks will likely hold their ground much better than high-flying technology stocks, especially those chasing artificial intelligence mania. With a product always in demand and the summer heat right around the corner, high-yielding utilities may be the best idea now for worried investors, especially as data center demand cranks up the volume for electricity.
FirstEnergy
With a big dividend and after posting stellar results for the quarter, this is a top Goldman Sachs pick. FirstEnergy Corp. (NYSE: FE) and its subsidiaries are involved in electricity transmission, distribution, and generation.
Its Distribution Segment, which consists of the Ohio Companies and FirstEnergy Pennsylvania Electric Company, distributes electricity in Ohio and Pennsylvania.
The Integrated segment includes the distribution and transmission operations under:
- Jersey Central Power & Light Company
- Monongahela Power Company, as well as its regulated generation operations
- The Potomac Edison Company
The segment also distributes electricity in New Jersey, West Virginia, and Maryland, provides transmission infrastructure, and operates 3,604 MWs of regulated net maximum generation capacity.
The Stand-Alone Transmission segment consists of its ownership in FET and KATCo, which includes transmission infrastructure owned and operated by the Transmission Companies and used to transmit electricity.
Goldman Sachs has set a $47 target price.
NextEra Energy
Serving the always-growing state of Florida, this company is poised for a strong balance in 2025. NextEra Energy Inc. (NYSE: NEE) is an electric power and energy infrastructure company.
It operates through its wholly owned subsidiaries,
- NextEra Energy Resources
- NextEra Energy Transmission (NEER)
- Florida Power & Light (FPL)
The FPL segment is a rate-regulated electric utility that generates, transmits, distributes, and sells electric energy in Florida. It has approximately 35,052 megawatts of net generating capacity, over 91,000 circuit miles of transmission and distribution lines, and 921 substations.
The NEER segment owns, develops, constructs, manages, and operates electric generation facilities in wholesale energy markets in the United States and Canada. It also includes assets and investments in other businesses focused on clean energy, such as battery storage, natural gas pipelines, and renewable fuels. The segment also owns, develops, constructs, and operates rate-regulated transmission facilities in North America.
The Goldman Sachs price objective is $91.
Southern Company
Southern Co. (NYSE: SO) is a leading energy company that generates, transmits, and distributes electricity to almost 9 million customers. This large-cap utility leader pays a solid dividend and offers considerable total return potential. It operates through three segments:
- Gas Distribution Operations
- Gas Pipeline Investment
- Gas Marketing Services
The company also develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity in the wholesale market; and distributes natural gas in Illinois, Georgia, Virginia, and Tennessee, as well as provides gas marketing services, gas distribution operations, and gas pipeline investments operations.
Southern Company serves approximately 8.8 million electric and gas utility customers and offers digital wireless communications and fiber optics services.
Goldman Sachs’s price target for the shares is $100.
Xcel Energy
This stock may hold the biggest upside potential of these four Goldman Sachs picks. Xcel Energy Inc. (NASDAQ: XEL) is an electric and natural gas delivery company that serves a large portion of the United States.
The company provides a comprehensive portfolio of energy-related products and services to approximately 3.9 million electric and 2.2 million natural gas customers through four utility subsidiaries:
- NSP-Minnesota
- NSP-Wisconsin
- PSCo
- SPS
The company operates through two segments. Its regulated electric utility segment generates, purchases, transmits, distributes, and sells electricity in:
- Colorado
- Michigan
- Minnesota
- New Mexico
- North Dakota
- South Dakota
- Texas
- Wisconsin
In addition, this segment includes sales for resale and provides wholesale transmission service to various entities in the United States. The regulated electric utility segment also includes wholesale commodity and trading operations.
Its regulated natural gas utility segment purchases, transports, stores, distributes, and sells natural gas primarily in portions of:
- Colorado
- Michigan
- Minnesota
- North Dakota
- Wisconsin
The Goldman Sachs target price is posted at $79.
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