Energy demand from data centers is expected to double by 2028, according to the Lawrence Berkeley National Laboratory. However, the challenge is that the U.S. power grid is old, overloaded, and slow to expand, as it often requires years for new connections. Because of this, data centers are increasingly turning to “off-grid” solutions, where they generate or secure power directly from their own sources. Interestingly, natural gas is quickly becoming the leading option since it is abundant, affordable, and much faster to develop than nuclear or solar projects, according to Yahoo Finance.
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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%.
