Electricity is a hot commodity, now that tech companies are paying a premium for it to power their artificial-intelligence data centers.
The trend has lifted all sorts of stocks, from independent power producers to regulated utilities, to the makers of power equipment like GE Vernova and Bloom Energy.
Utilities have ridden the trend to 23% returns in 2024 and 16% returns so far this year. But there will be new challenges in 2026. Most notably, politicians have grown concerned about increases in electricity rates and are already pressuring utilities to keep rates steady or even lower them. Last month, President Donald Trump and New York City Mayor-Elect Zohran Mamdani said at a news conference that they want utility Consolidated Edison to lower rates, sending the stock down.
Analysts at three banks recently put out notes looking at which stocks might be able to keep the momentum going in 2026. The analysts generally prefer utilities and other power providers that can meet new demands from data centers without heaping new burdens on consumers.
“We expect 2026 to be a year for selective stock-picking and agility amid affordability and election risks, rather than driven [by] broad-based utility gains around growth as seen in 2025,” wrote Bank of America analyst Ross Fowler.
Fowler laid out his case for an array of stocks that he says can navigate this kind of political and economic environment. He broke them up into categories. Top undervalued growth opportunities include Alliant Energy, Sempra, Xcel Energy, and Southwest Gas Holdings. He likes Public Service Enterprise Group, a New Jersey utility whose shares have trailed competitors this year.
Eversource and PG&E are utilities with growth opportunities that are less tied to the data center theme, meaning they can hold up even if the AI narrative breaks down. He also considers ONE Gas, a natural gas utility, as a defensive play. And Fowler says investors should buy power producers Constellation Energy, Vistra, and Talen Energy on weakness.
Morgan Stanley analyst David Arcaro is also concerned about electricity affordability and how it could limit utility earnings growth. His top utility stocks for 2026 include AEP, DTE Energy, Idacorp, and Sempra. Top power producers include Talen Energy, Vistra, and Solaris Energy Infrastructure. And his favorite renewable-focused names are NextEra Energy and AES.
Jefferies analyst Julien Dumoulin-Smith likes AEP, Entergy, Ameren, PPL, NiSource, CenterPoint Energy, MDU Resources Group; UGI, NRG Energy, and NextPower.