Jefferies Names Top US Utility and Power Stocks, Citing Data Center Growth

Jefferies has released its top stock selections across the U.S. power and utilities landscape, pinpointing companies positioned to capitalize on the artificial intelligence-driven boom in data center construction. The firm's analysis spans integrated utilities, independent power producers, and midstream operators, focusing on growth potential, defensive characteristics, and valuation.

Data Centers and Defensive Plays Drive Picks

A primary theme in Jefferies' report is the significant opportunity presented by rising electricity demand from data centers. The firm highlights companies with direct exposure to this trend as having potential for significant upside. Entergy (ETR) was noted for having one of the sector's best data center opportunity sets, with analysts expressing "high confidence" in new announcements over the next six months.

Beyond pure growth, the firm also favors companies with strong fundamentals and defensive qualities. Ameren (AEE) was selected for its "leading balance sheet" and a lower-risk outlook that is less dependent on the data center narrative. Similarly, Xcel Energy (XEL) was praised for offering one of the most favorable low price-to-earnings growth ratios in the sector.

Top Selections and Key Catalysts

Jefferies outlined several key companies, each with specific catalysts that could drive share performance. The firm's top picks include:

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• NiSource (NI): Analysts believe the negative impact of a recent Indiana utility regulatory decision is now fully priced into the stock. They remain optimistic about a potential new generation contract with a major customer, such as Microsoft, by the third-quarter 2026 earnings call.
• Entergy (ETR): The company's significant exposure to data center growth is a core part of the investment thesis. Jefferies anticipates developments that could drive consensus estimates higher.
• Xcel Energy (XEL): The stock is seen as attractive based on its valuation, with potential further upside from the underwriting of Colorado wildfire legislation.
• American Electric Power (AEP): While acknowledging near-term uncertainty, Jefferies expects clarity by the third quarter on growth enhancement from catalysts like major projects in Texas and regulatory reviews.
• PPL Corporation (PPL): A potential announcement regarding a new generation joint venture with Blackstone is expected in the coming months, which could serve as a positive catalyst.

Broader Sector Opportunities

The report's scope extends beyond traditional utilities to include engineering, construction, and midstream energy. MasTec (MTZ) was highlighted for what Jefferies views as an "unwarranted" valuation discount to its peers, with its acquisition of Superior Group expanding its access to the data center construction market.

In the midstream sector, Williams Companies (WMB) was chosen for its significant balance sheet flexibility and a repeatable partnership framework that can support future growth. The list also includes NRG Energy (NRG), where analysts argue that high commodity uncertainty is already reflected in the company's attractive free cash flow yield.