AI, Data Centers, and Big Tech Are Devouring Electricity: Jim Cramer Has 4 Favorite Utility Stocks

We have covered Jim Cramer for almost 20 years here at 24/7 Wall St., and like all opinionated Wall Street stock pundit pickers, he has had more than his fair share of home runs and some swings and misses. One thing is sure: His opinions, whether good, bad, or indifferent, do not go unheard, as he has maintained one of the most prominent bully pulpits in the financial industry for years. So, with that in mind, when Cramer bellows from that bully pulpit, we listen.

Big tech companies are increasingly partnering with utility companies to secure reliable, low-carbon energy for their power-intensive data centers, notably to support the demands of artificial intelligence and cloud computing. Five of the world’s largest technology companies have already made some significant deals:

• Amazon.com Inc. (NASDAQ: AMZN)
• Microsoft Corp. (NASDAQ: MSFT)
• Alphabet Inc. (NASDAQ: GOOGL)
• Meta Platforms Inc. (NASDAQ: META)
• Oracle Corp. (NYSE: ORCL)

With a career that started at Goldman Sachs, from the formation of his hedge fund, Cramer Berkowitz, to his founding of The Street, which he wrote for from 1996 to 2021, to his popular Mad Money show, Jim Cramer has something in his pocket that many on Wall Street lack—access to almost everybody, regardless of their Wall Street status. As opposed to many who churn out Wall Street platitudes and stock-picking advice, Cramer at least does the homework required for the masses who see him via television or the internet to get a reasonable look at what he is covering at any given time.

We asked Grok, the AI arm of X, formerly known as Twitter, to look for Cramer’s favorite utility stocks over the years. These stocks align with Cramer’s broader thesis that utilities are well-positioned for 2025 due to their steady dividends, resilience against tariffs, and increasing energy demands from AI data centers. He particularly favors stocks with yields above 2.5% and a history of dividend growth, while cautioning against yields above 8% as potential risk indicators. Some of Cramer’s top picks have already secured significant deals with major technology companies, while others are in the process of doing so.

Four of Cramer’s favorite ideas are also top utility picks at 24/7 Wall St., and all are rated Buy at top Wall Street firms that we cover.

American Electric Power

This is one of the largest electric utility companies in the United States, serving more than 5 million customers across 11 states. This industry-leading utility pays investors a hefty, reliable dividend. American Electric Power Co. Inc. (NYSE: AEP) is an electric public utility holding company that generates, transmits, and distributes electricity for sale to retail and wholesale customers in the United States.

It operates through these segments:

• Vertically Integrated Utilities
• Transmission and Distribution Utilities
• AEP Transmission Holdco
• Generation & Marketing

The company generates electricity using:

• Coal
• Lignite
• Natural gas
• Renewable energy
• Nuclear energy
• Hydro
• Solar energy
• Wind
• And other energy sources

It also supplies and markets electric power wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants.

Morgan Stanley has an Overweight rating with a $113 target price.

Dominion Energy

Dominion Energy Inc. (NYSE: D) is an integrated energy utility. It offers electricity, natural gas, and related services. Amazon has partnered with Dominion Energy in Virginia to explore the development of a small modular nuclear reactor (SMR) near the North Anna nuclear facility to power its data centers. Dominion Energy operates through four segments:

• Dominion Energy Virginia
• Gas Distribution
• Dominion Energy South Carolina
• Contracted Assets

The Dominion Energy Virginia segment generates, transmits, and distributes regulated electricity to residential, commercial, industrial, and governmental customers in Virginia and North Carolina.

The Gas Distribution segment serves residential, commercial, and industrial customers and engages in:

• Regulated natural gas gathering
• Transportation
• Distribution and sales activities
• Distributes nonregulated renewable natural gas

The Dominion Energy South Carolina segment generates, transmits, and distributes electricity and natural gas to residential, commercial, and industrial customers in South Carolina.

Dominion serves approximately 7 million customers, and its portfolio of assets includes around:

• 30.2 gigawatts of electric generating capacity
• 10,500 miles of electric transmission lines
• 85,600 miles of electric distribution lines
• 94,200 miles of gas distribution lines

Barclays has an Overweight rating on the stock, accompanied by a $58 price target.

Entergy

This top provider is engaged primarily in electric power production and retail distribution operations in the deep south of the United States. This top utility stock always makes sense for conservative investors and pays a reliable dividend. Together with its subsidiaries, Entergy Corp. (NYSE: ETR) produces and distributes electricity in the United States through two segments.

The Utility segment generates, transmits, distributes, and sells electric power in portions of:

• Arkansas
• Louisiana
• Mississippi
• Texas
• City of New Orleans

It also distributes natural gas.

The Entergy Wholesale Commodities segment is involved in:

• The ownership, operation, and decommissioning of nuclear power plants located in the northern United States
• Sale of electric power to wholesale customers
• Provision of services to other nuclear power plant owners
• Ownership of interests in non-nuclear power plants that sell electric power to wholesale customers

The company generates electricity from various sources, including gas, nuclear, coal, hydro, and solar. It sells energy to retail power providers, utilities, electric power cooperatives, power trading organizations, and other power generation companies.

Its power plants have approximately 24,000 megawatts (MW) of electric generating capacity, which includes 5,000 MW of nuclear power.

The company delivers electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi, and Texas.

KeyCorp has an Overweight rating and an $85 target price.

Sempra

Sempra (NYSE: SRE) is a North American public utility holding company based in San Diego, California. Like the entire sector, this utility has performed well, yet it continues to offer a solid dividend. Sempra operates as an energy infrastructure company in the United States and internationally.

It operates through three segments:

• Sempra California
• Sempra Texas Utilities
• Sempra Infrastructure

The Sempra California segment provides natural gas and electric service to Southern California and part of central California through its subsidiaries, SDG&E and SoCalGas.

The Sempra Texas Utilities segment holds its investment in Oncor Holdings, which owns an over 80.25% interest in Oncor, a regulated electric transmission and distribution utility serving customers in the north-central, eastern, western and panhandle regions of Texas, and its indirect 50% interest in Sharyland Holdings, which owns Sharyland Utilities, a regulated electric transmission utility serving customers near the Texas-Mexico border.

The Sempra Infrastructure segment develops, builds, operates, and invests in energy infrastructure.

Morgan Stanley has an Overweight rating with an $88 price objective.

Five Stocks Paying 7% and Higher Dividends That Nobody Ever Talks About

 

The post AI, Data Centers, and Big Tech Are Devouring Electricity: Jim Cramer Has 4 Favorite Utility Stocks appeared first on 24/7 Wall St..