Utility stocks have emerged as a promising investment avenue, particularly in light of evolving energy demands and regulatory landscapes. According to a recent report from Deloitte, U.S. electricity demand increased in 2025, largely driven by industrial electrification, artificial intelligence workloads, and transportation needs. The report predicts that peak demand will rise by 26% by 2035, with significant contributions from industrial electrification, expected to add 25 GW, and data centers projected to consume 176 GW by 2028, marking a fivefold increase since 2024.
Despite the anticipated growth in demand, the expansion of supply remains sluggish. As of mid-2025, approximately 2 terawatts were trapped in interconnection lines, hindering progress. This has created reliability issues, exacerbated by 15 natural disasters in the first half of 2025, which caused damages exceeding $1 billion. Furthermore, residential retail prices are forecasted to rise by 4.5% from 2024.
The 2025 reconciliation bill has introduced stricter compliance requirements and reduced incentives for green energy initiatives. As a response, utilities are prioritizing firm capacity, projecting that 209 GW of new capacity will offset 104 GW of coal and gas retirements. Near-term strategies include adding around 19 GW of gas, extending the life of coal and nuclear plants, and utilizing peaker plants, while long-term storage regulations are expected to exceed 2.75 GW. The capital requirements for these expansions are substantial, estimated to exceed $1.4 trillion, prompting a shift towards mergers and acquisitions, securitization, partnerships, and tax-credit monetization.
Investors may find opportunities in the following eight utility stocks, which have demonstrated profitability and garnered interest from hedge funds.
Top Utility Stocks for Investment
1. NextEra Energy, Inc. (NYSE:NEE)
– TTM Net Income as of December 30: $7.21 billion
– TTM Net Income Margin: 20.81%
– Number of Hedge Fund Holders: 72
NextEra Energy remains a leading choice among investors. A recent analysis by Jefferies revised its price target to $88 while maintaining a Hold rating. The firm anticipates a compound annual growth rate of approximately 9% in earnings per share (EPS) through 2032, exceeding the consensus forecast of 7.6%.
2. Duke Energy Corporation (NYSE:DUK)
– TTM Net Income as of December 30: $4.92 billion
– TTM Net Income Margin: 15.97%
– Number of Hedge Fund Holders: 62
Duke Energy continues to be a robust option for investors, with UBS recently adjusting its price target from $135 to $126. The company is exploring new nuclear power possibilities, aiming to enhance reliability and reduce costs.
3. The Southern Company (NYSE:SO)
– TTM Net Income as of December 30: $4.46 billion
– TTM Net Income Margin: 15.42%
– Number of Hedge Fund Holders: 58
While Morgan Stanley downgraded its outlook for The Southern Company, the firm still highlights the potential for growth driven by data centers and increased energy demand, even as political and regulatory risks loom.
4. American Electric Power Company, Inc. (NASDAQ:AEP)
– TTM Net Income as of December 30: $3.66 billion
– TTM Net Income Margin: 17.23%
– Number of Hedge Fund Holders: 56
American Electric Power has garnered attention for its strong earnings growth strategy. Analysts project a retail power load increase and rate base growth, supporting a healthy outlook for the next five years.
5. American Water Works Company, Inc. (NYSE:AWK)
– TTM Net Income as of December 30: $1.11 billion
– TTM Net Income Margin: 21.93%
– Number of Hedge Fund Holders: 53
American Water Works has expanded its footprint through acquisitions, including a recent purchase of the Hopewell Borough water system for $6.4 million. The firm remains committed to enhancing infrastructure and service quality.
6. Sempra (NYSE:SRE)
– TTM Net Income as of December 30: $2.11 billion
– TTM Net Income Margin: 15.75%
– Number of Hedge Fund Holders: 41
Sempra’s recent regulatory challenges may pose risks, but analysts remain optimistic about its growth potential, anticipating a positive impact from data centers in the upcoming year.
7. Dominion Energy, Inc. (NYSE:D)
– TTM Net Income as of December 30: $2.61 billion
– TTM Net Income Margin: 16.79%
– Number of Hedge Fund Holders: 35
Dominion Energy has faced regulatory hurdles but maintains that its Coastal Virginia Offshore Wind Project is crucial for national security and energy reliability. The firm warns that halting development could jeopardize job stability and energy costs.
8. Ameren Corporation (NYSE:AEE)
– TTM Net Income as of December 30: $1.41 billion
– TTM Net Income Margin: 16.34%
– Number of Hedge Fund Holders: 34
Ameren Corporation continues to impress with its financial performance. Analysts have maintained positive ratings, citing a stable outlook driven by increasing demand from data centers.
Investors are encouraged to carefully consider these stocks, as they reflect strong profitability and potential for growth amidst a changing energy landscape. The evolving market dynamics underscore the importance of strategic investment in the utility sector, which is poised for substantial developments in the coming years.
