AI is fueling energy demand. Wells Fargo names two main beneficiaries

Investors should pay attention to the shares of energy companies - the demand for them is growing against the background of rapid development of artificial intelligence, analysts of Wells Fargo explain. Technology giants are actively building energy-intensive data centers necessary for training AI models, which will ensure long-term growth in demand for energy capacity, CNBC writes. Wells Fargo has identified a number of companies in this market with the potential for faster growth, whose shares are already showing strong dynamics in 2025. Among the bank's favorites are Constellation Energy and Sempra.

The company operates in the generation and supply of electricity and natural gas, emphasizing sustainable solutions. The bank gave Constellation Energy an "above market" rating equivalent to a buy recommendation on its securities and set a target price of $478 per share, which implies an upside of about 22%.

Analysts call Constellation stock "the best way to make money on data center construction and energy growth," noting the company's strong position in natural gas and nuclear generation.

The company's quotes jumped 4.5% in trading on October 29, and almost 80% since the beginning of the year. But the vast majority of analysts covering its securities - 15 out of 18 - see the potential for further growth and recommend buying them, follows from the data of MarketWatch. The remaining three analysts gave Constellation Energy a neutral rating. At the same time, the average target is already slightly below the current quotes.

It is one of the largest energy infrastructure operators in North America, serving about 40 million customers. The company also received an "outperform" rating from Wells Fargo, and the target price of $115 per share set by it implies a potential upside of more than 23%.

Wells Fargo estimates that Sempra is trading at a discount despite its solid growth rate. Its earnings per share growth is likely to exceed the previously forecasted 6-8%, the bank's analysts said.

At 2025, Sempra's market value is up about 5%. At trades on October 29 it decreased by 0.3%. According to MarketWatch, the market is generally positive about the company's securities. 10 analysts out of 19 who track Sempra's dynamics recommend its shares to buy. Six - suggest to hold, and three - to sell.

"The growth in electricity demand is structural, not temporary. This makes the sector resilient and attractive on a risk-return basis when compared to the average earnings growth of companies in the S&P 500," Wells Fargo analyst Shahriar Purreza wrote.

UBS estimates, as CNBC writes, that investment in AI technology could reach $375 billion this year and exceed $500 billion by the end of 2026. Despite concerns about inflating a possible AI bubble, Wells Fargo doesn't expect increased demand to abate anytime soon. "This is not a short-term fashion," Purreza emphasized.

Wells Fargo analysts cited the return of manufacturing in the U.S. and the accelerating electrification of the economy as additional growth drivers for the sector.

This article was AI-translated and verified by a human editor