The numbers coming out of big tech this year are hard to fathom. Amazon plans to spend about $200 billion on capital expenditures in 2026. Microsoft now expects roughly $190 billion. Alphabet has guided to as much as $190 billion, and Meta Platforms recently raised its range to $125 billion to $145 billion. Together, the four are on track to spend more than $700 billion in a single year, the vast majority of it on the data centers and chips behind artificial intelligence (AI). The bills have grown so large that even these cash-rich companies are now leaning on debt and equity markets to help fund them.
All that computing power has to be plugged in somewhere. And that is where a quieter set of beneficiaries comes in: the electric utilities that generate and deliver the electricity these data centers consume. One of the most exposed is American Electric Power (AEP 0.63%), which operates the largest electricity transmission network in the U.S.
Image source: Getty Images.
A surge in contracted demand
In the first quarter of 2026, AEP signed up another 7 gigawatts of future load, bringing its total contracted load expected by 2030 to 63 gigawatts — up from 56 gigawatts just one quarter earlier. Nearly 90% of that is data centers, including the same hyperscalers behind that $700 billion in spending, with the rest mostly industrial customers. A single gigawatt can power hundreds of thousands of homes, so this is an enormous block of contracted future demand landing on one utility.
The demand is concentrated in AEP’s fastest-growing states — Indiana, Ohio, Oklahoma, and Texas — and it is reshaping the company’s spending. AEP raised its five-year capital plan to $78 billion, up from $72 billion a quarter earlier, with most of the increase going toward new transmission and generation. Management expects that investment to grow its rate base at nearly an 11% compound annual rate and to lift its long-term operating earnings compound annual growth rate above 9% a year through 2030 — a brisk pace for a regulated utility.
The build-out is already showing up in the utility’s financials. AEP’s first-quarter revenue rose about 10% year over year to $6.0 billion, and its operating earnings per share rose to $1.64 from $1.54 in the same quarter of 2025. Management reaffirmed its 2026 operating earnings guidance of $6.15 to $6.45 per share. And to soften the impact on existing customers, AEP said its large-load contracts could generate up to $16 billion in cost offsets over the life of the agreements.
Today’s Change
(-0.63%) $-0.80
Current Price
$126.31
Key Data Points
Market Cap
$69B
Day’s Range
$126.26 – $129.59
52wk Range
$100.72 – $139.44
Volume
5M
Avg Vol
3.8M
Gross Margin
31.77%
Dividend Yield
2.97%
The risks and the valuation
The growth case for AEP, of course, rests on the build-out actually getting built — and that is not guaranteed. The biggest constraint is the slow pace at which the regional operators that run the grid connect new power plants.
“[I]f something is not done now, I expect we could still be having these same conversations in 10 years,” said AEP CEO Bill Fehrman in the company’s first-quarter 2026 earnings call.
Funding the plan carries its own risk.
AEP is leaning on both debt and fresh stock, including a $2.6 billion common stock offering in May and about $7 billion in growth equity planned through 2030. Issuing shares to build, however, dilutes existing shareholders. And as a regulated utility, AEP needs state regulators to sign off on the rates it charges and the returns it earns — decisions ultimately out of its control.
There is also the question of whether the AI spending boom underpinning all this demand holds up. AEP says its take-or-pay contracts, which require customers to pay minimum demand charges whether or not they use the full capacity, limit the downside. But a sustained cut to hyperscaler AI spending could still leave it with plants and lines built for demand that never arrives.
Then there is the price. At about $126 as of this writing, up about 10% year to date, AEP trades at a forward price-to-earnings ratio of about 20. That is a robust valuation multiple for a utility, and it shows the market already paying up for years of data center-driven growth. With that said, the stock boasts a meaningful dividend yield of about 3%.
For investors who believe the AI build-out has years left to run, AEP offers something the tech giants spending the cash do not: a regulated, contracted, and somewhat predictable way to profit from it, with an attractive dividend attached.
