AI data-center electricity demand growth drives opportunities across U.S. and European utilities, renewables, storage and power-equipment chains
AI summary card
AI data-center electricity demand growth drives opportunities across U.S. and European utilities, renewables, storage and power-equipment chains
HSBC views electricity-load growth from U.S. AI data centers as a medium- to long-term investment theme spanning utilities, networks, generation, solar, storage and equipment supply chains, and prefers Buy-rated names such as NextEra, RWE, Iberdrola, EDP and National Grid.
- Large U.S. and European utilities are expected to generate average total shareholder returns of about 11% over the next five years, driven by EPS growth and dividend income.
- U.S. demand growth and data centers can lift electricity volumes, prices and project margins, benefiting flexible generation, PPA repricing and new-build projects.
- European utilities gain exposure through U.S. regulated networks and U.S. renewable assets, with EDPR and National Grid showing particularly high shares of U.S. EBITDA in 2026-30e.
- The equipment chain benefits include grid equipment, wind OEMs, cables, substations, transformers, gas turbines, backup power, fuel cells and nuclear-related suppliers.
- U.S. BESS installed capacity rose from 3GW in 2020 to 31GW in 2024; the report remains constructive on storage growth, but flags FEOC rules and tariff uncertainty.
Report interpretation
Overview
This report is the fifth installment in HSBC's "Powering AI" series, with a focus on mapping the companies and industry chains that benefit from growth in electricity load from U.S. AI data centers. The report argues that AI-driven electricity demand growth is not only positive for U.S. utilities' volumes and margins, but also extends to European utilities with U.S. assets, renewable developers, solar companies, battery storage systems, grid infrastructure and data-center power-equipment suppliers.
Core views
The report's core view is that U.S. power demand has entered a higher-growth phase, and utilities can benefit through new generation, network investment, pricing upside and higher PPA prices; European utilities can capture the same theme through U.S. regulated networks and U.S. renewable assets; and power equipment, gas and backup power, nuclear sentiment, BESS, residential and utility-scale solar all form a multi-layered beneficiary chain. HSBC expects the five-year TSR of the U.S. large-utility basket to be about 11%, while the average TSR of the European utility basket excluding Drax is also about 11%.
Analysis framework
The report uses thematic exposure as the main thread and breaks down the benefit path by asset class and supply-chain segment: first, it analyzes demand, margins and EPS growth for U.S. utilities; second, it compares U.S. EBITDA exposure among European utilities; then it extends to data-center power equipment, gas and backup power, nuclear, BESS, residential and utility-scale solar, and related supply chains; finally, it provides ratings, target prices and key risks for the companies in focus.
Methodology notes
Maps electricity demand growth from AI data centers into the utilities, generation, network, equipment, storage and solar chains.
This framework focuses on how demand growth translates into higher electricity volumes, pricing and PPA upside, capital expenditure expansion, growth in the regulated asset base, and equipment-order opportunities.
Total shareholder return is estimated as the sum of 2026-30e EPS CAGR and 2026e dividend yield.
The report uses TSR to compare the medium-term return potential of U.S. and European utilities, and combines it with P/E, target prices and ratings to express preference.
Identifies thematic beneficiaries based on U.S. revenue, U.S. EBITDA share, regulated networks, renewables, equipment and storage businesses.
For example, EDPR and National Grid have relatively high U.S. EBITDA shares in 2026-30e, while First Solar, Enphase and SolarEdge have exposure through U.S. solar, home-energy and data-center power architecture.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- NextEra (NEE US)A core utility beneficiary of U.S. AI-driven electricity demand growth, rated Buy with a USD103.00 target price.
- Strengths
- NEER offers integrated transmission, gas and renewable solutions; FPL has a low-cost, highly efficient grid and new tariffs for large loads; the report estimates EPS CAGR of about 10% to 2032e.
- Weaknesses
- Growth depends on project execution, regulatory outcomes and capital expenditure delivery.
- Comparison
- The report explicitly names NextEra as its preferred name among U.S. utilities.
- Risks
- Regulatory returns, project approvals and construction delays, interest rates and power-price volatility.
- National Grid (NG LN)Gains multi-year exposure to power-network growth through its U.S. and U.K. grids, rated Buy with a GBp1,500 target price.
- Strengths
- Regulated networks provide high earnings visibility, and grid investment is accelerating into the 2030s.
- Weaknesses
- The long-term role of the remaining gas network remains uncertain.
- Comparison
- It has a relatively high U.S. EBITDA exposure of 46% among European utilities.
- Risks
- Unfavorable regulatory conditions, the impact of electrification on the value of the U.S. gas network, and delays to U.K. transmission project approvals.
- RWE (RWE GR)Participates in the theme through U.S.-heavy onshore renewables and European offshore wind, rated Buy with a EUR66.00 target price.
- Strengths
- Diversified portfolio, strong balance sheet, and 2026-30e EPS and DPS CAGR of about 11% and 10%, respectively.
- Weaknesses
- Renewable build-out and German gas-plant opportunities still need to be executed on time and within budget.
- Comparison
- The report lists RWE as one of its preferred Buy-rated European utilities.
- Risks
- Execution delays, changes in market and regulation, and margin pressure from competition.
- Iberdrola (IBE SM)Benefits through regulated networks and contracted renewables, rated Buy with a EUR21.50 target price.
- Strengths
- Low-risk business mix, 2025-30e net profit CAGR of about 8%, and around EUR37bn of planned investment in regulated networks during 2025-28.
- Weaknesses
- Renewables and customer EBITDA growth may be partially offset by hydrology normalization and price-margin normalization.
- Comparison
- The report lists it as one of the preferred European utilities with U.S. growth exposure.
- Risks
- Changes in regulatory returns, execution risk, and interest-rate and FX volatility.
- EDP (EDP SM)Gains exposure to improving U.S. data-center demand through renewables and network businesses, rated Buy with a EUR5.20 target price.
- Strengths
- The strategic plan emphasizes disciplined investment and deleveraging, and annual renewable additions after 2028 are expected to be around 2GW.
- Weaknesses
- Growth is affected by balance-sheet capacity, the renewable market and near-term hydropower volatility.
- Comparison
- The report lists EDP as one of its preferred European utilities.
- Risks
- Execution delays, unfavorable regulatory and market dynamics, and competition limiting growth and margins.
- First Solar (FSLR US)A U.S. large-scale solar module producer that benefits from AI data-center demand for renewable power, rated Hold with a USD211.00 target price.
- Strengths
- U.S.-headquartered with domestic manufacturing advantages; 96% of 2025 revenue comes from the U.S., supported by U.S. policy and FEOC rules.
- Weaknesses
- The Hold rating, valuation and cyclicality may limit near-term upside.
- Comparison
- Compared with residential inverters and storage companies, First Solar is more exposed to utility-scale ground-mounted plants and grid-supply applications.
- Risks
- Policy changes, tariffs and supply chains, solar pricing and project timing.
- Enphase Energy (ENPH US)A U.S. home-energy solutions company rated Buy with a USD52.00 target price, benefiting from higher residential electricity prices and storage demand.
- Strengths
- More than 80% of revenue comes from the U.S.; its microinverters and battery products benefit from rising retail electricity prices; the IQ9 microinverter and fifth-generation battery are planned for launch in 2H26.
- Weaknesses
- Residential solar demand is sensitive to interest rates, consumer spending and channel inventory.
- Comparison
- Compared with First Solar, Enphase is more exposed to residential distributed energy and improving storage economics.
- Risks
- Slowing residential installation demand, changes in policy incentives, competition and margin pressure from falling costs.
- SolarEdge Technologies (SEDG US)A provider of inverter and battery-storage products rated Hold with a USD38.00 target price, with exposure to U.S. AI data-center power architecture.
- Strengths
- In 2025, 61% of solar revenue came from the U.S., and the company is working with Infineon to develop high-efficiency solid-state transformers for AI and hyperscale data centers.
- Weaknesses
- SST mass production is expected only by 2028, implying a long commercialization and execution cycle.
- Comparison
- Compared with traditional solar inverters, SST offers more direct exposure to data-center power architecture.
- Risks
- Delays in technology commercialization, competition, U.S. demand and margin volatility.
Key data
- Average TSR of large U.S. utilities11%Estimated as the sum of 2026-30e EPS CAGR and 2026e dividend yield.
- Average dividend yield of large U.S. utilities3%Used as part of the TSR estimate for U.S. utilities.
- 2026e P/E of large U.S. utilities19.5xBased on the report's estimates.
- Average TSR of European utilities11%Excluding Drax, and including an average 4% dividend yield and average 8% 2026-30e EPS growth.
- 2026e P/E of European utilities17.3xThe report's estimate for the European utility basket.
- EDPR U.S. 2026-30e EBITDA share68%Highlighted by the report as one of the highest U.S. exposures among European utilities.
- National Grid U.S. 2026-30e EBITDA share46%Highlighted by the report as a representative European network asset with relatively high U.S. exposure.
- U.S. exposure of RWE, EDP, Orsted, Iberdrola23-33% of 2026-30e EBITDAMainly through U.S. renewables, networks and related assets.
- U.S. BESS installed capacity3GW in 2020 to 31GW in 2024The report says capacity has grown roughly tenfold over four years and remains constructive on long-term installations.
- Peak forecast for U.S. BESS new installations25GW in 2028; 20GW per year to 2035 thereafterThe report expects new additions to peak in 2028 as subsidy windows influence demand, while remaining at a relatively high annual level thereafter.
Impact & implications
For investors, AI data centers are not just a single technology-hardware theme, but a demand shock that spreads into power-system assets and supply chains. The most direct beneficiaries are utilities with exposure to grids, generation, renewables and high-growth markets; midstream equipment and storage companies benefit from data-center interconnection, grid expansion, backup power and stable-supply demand; and solar and home-energy solutions also benefit from higher electricity prices, onsite generation and lower storage costs.
Risks
- Common risks for the utility sector include changes in the regulatory and political environment, shifts in macro variables such as interest rates, electricity-price risk, FX risk and stranded-asset risk.
- National Grid faces risks from unfavorable regulatory returns, the long-term value of its U.S. gas network being challenged by electrification, and delays to approvals for growth projects in the U.K. transmission network.
- Renewable companies such as RWE face risks that commercial-plan execution and growth targets are delayed, and that market, regulatory or competitive dynamics compress margins and growth.
- Although BESS and battery chains benefit from tax credits, FEOC compliance and tariff uncertainty remain.
- If AI data-center electricity demand falls short of expectations, or if grid bottlenecks, permitting and equipment-delivery constraints persist, the pace at which the theme is realized could slow.
What to watch
- Whether incremental AI data-center load in the U.S. and interconnection timing continue to exceed expectations.
- Changes in prices, capacity and flexible-generation margins in high-growth power markets such as ERCOT and PJM.
- Regulatory reviews, RAB growth, capital expenditure plans and financing costs for U.S. and European utilities.
- PPA signing prices, durations and preferred energy-mix choices of large technology companies and data-center operators.
- BESS new installations, OBBB-related tax credits, FEOC rules and the implementation details of tariffs.
- Orders, gross margins, inventories and mass-production progress for solar and power-electronics companies such as First Solar, Enphase and SolarEdge.