Utilities AI supercharges rise in electricity prices

Andre Meade

October 30, 2025

Residential electricity prices in the U.S. recently reached a record high amid the AI data center gold rush, raising concerns around energy supplies and the cost burden for consumers.

Rising prices also stem from tightness in power markets and the massive costs to upgrade and expand aging electricity infrastructure. The average price of electricity touched 19 cents per kilowatt hour in August of 2025, according to the U.S. Bureau of Labor Statistics, compared to about 14 cents in August 2015.

Electricity bills surge as data centers expand

Source: U.S. Bureau of Labor Statistics, Federal Reserve Bank of St. Louis. Data from September 1, 2015, to September 1, 2025. As of October 24, 2025. 

Power demand is growing for the first time in close to 20 years, which is helping raise electricity prices. Various utility firms are positioning themselves to benefit from the data center boom.

“The power generation industry is entering a bull market driven in part by AI’s growth,” says utility-focused equity analyst Andre Meade. “Electricity demand is expected to increase materially if the AI boom continues adding a tailwind to the overall utility sector.”

Independent power producers (IPPs) such as Constellation Energy, Vistra and NRG Energy benefit from higher power prices and volatility. They are deregulated and sell electricity at market rates. IPPs produce power through a diverse set of sources and have been tapped by AI hyperscalers such as Meta and Amazon to secure their energy needs.

Regulated utilities including Entergy, Southern Company and NiSource do not benefit directly from surging electricity prices. However, the large investments needed to upgrade and expand grid infrastructure may drive earnings higher. Companies producing grid-enhancing technologies and energy resource management systems, including Schneider Electric and Hitachi, are also integral to the ongoing power boom.

Along those lines, the S&P 500 Utilities Index is projected to post the second highest earnings growth among all S&P 500 sectors in the third quarter, based on consensus estimates compiled by FactSet. Moving forward, double-digit earnings growth is expected for three of the next four quarters, according to FactSet. The S&P 500 Utilities Index has posted a total return of 24% year to date, versus the S&P 500 at 18%, as of October 27, 2025.

Looking ahead, other factors are set to drive electricity demand, including the rapid expansion of semiconductor manufacturing and the wider adoption of electric vehicles. While AI spending remains the dominant force, any slowdown in investment could temper electricity demand, leading to price volatility. As companies assess their long-term energy needs, periods of fluctuation should not surprise investors. 

Read important disclosures

Andre Meade is an equity investment analyst with 27 years of investment industry experience (as of 12/31/2024). He has research responsibility for U.S. and Canadian utilities and pipelines. He holds a master’s degree in public policy from Harvard and a bachelor’s degree from Rutgers University.

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