Why Big Tech Is Betting Big on This Energy Source to Power Their Data Centers
Tech giants are flipping the switch on data center power—and Wall Street is finally paying attention.
The Energy Revolution Hitting Server Farms
Massive computing demands meet innovative power solutions as Silicon Valley's biggest players overhaul their energy infrastructure. These aren't incremental changes—they're complete paradigm shifts in how data gets processed.
Cutting Costs While Cutting Carbon
New energy approaches slash operational expenses by double-digit percentages while meeting sustainability targets. The move creates competitive advantages that extend beyond mere compliance—transforming energy from overhead into strategic asset.
Why Traditional Power Grids Can't Keep Up
Legacy energy systems buckle under AI's insatiable appetite for computation. Tech companies bypass aging infrastructure entirely, building self-sufficient power ecosystems that operate independently of regional grids.
The Bottom Line: Power as Competitive Moats
Energy strategy becomes business strategy as tech titans lock in long-term advantages. Meanwhile, traditional utilities watch from the sidelines—still trying to figure out why their stock multiples haven't budged since the dial-up era.
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It is worth noting that off-grid energy can come from different sources. For example, in 2024, Talen Energy (TLN) agreed to supply Amazon (AMZN) Web Services with nearly two gigawatts of nuclear power for a data center next to its Pennsylvania plant. Big Tech companies like Amazon and Meta (META) are also exploring solar and other renewable energy sources. But while nuclear and solar projects can take decades to build, natural gas plants can be ready in about five years, and some are already online.
Recent deals also show how fast demand for natural gas is rising. Indeed, Energy Transfer (ET) signed an agreement to provide 1.2 gigawatts of off-grid power to a Texas data center, while Blackstone (BX) paid over $1 billion for a natural gas plant in Pennsylvania. In addition, Meta is spending $10 billion on a new Louisiana data center that will rely on three natural gas turbines to meet its two-gigawatt power needs. As a result, industry leaders say that this is only the beginning, as natural gas is proving to be the most practical and efficient way to meet the huge energy needs created by AI and data centers.
Which Stock Is the Better Buy?
Turning to Wall Street, out of the five stocks mentioned above, analysts think that ET stock has the most room to run. In fact, ET’s average price target of $22.68 per share implies 30.7% upside potential. On the other hand, analysts expect the least from BX stock, as its average price target of $186.87 equates to a gain of 4.4%.
