Key Highlights

● AI data centers require enormous, steady amounts of electricity.

● Generac rose on a major backup-generator deal with Amazon.

● Vertiv and GE Vernova also benefited from the power theme.

● Utilities lagged despite the AI power demand story.

Artificial intelligence runs on electricity, and Wall Street is pricing that in. A string of earnings reports and comments made clear that the data-center boom has become as much about power plants, generators and natural gas as it is about chips, with one strategist describing AI compute as a natural gas demand story.

Large AI data centers draw enormous amounts of electricity around the clock, and in many regions new grid connections take years, so developers are turning to on-site generation, much of it fuelled by natural gas, along with backup generators and long-term supply deals with utilities.

The Day's Power Plays

Generac rose after reporting record third-quarter sales and announcing a long-term deal to supply Amazon data centers with backup generators, while ProPetro climbed after reporting a revenue beat, with its power unit negotiating hundreds of megawatts of data-center work.

Utilities joined in on the fundamentals, with American Electric Power raising its outlook and pointing to data-center demand, though its shares slipped, and NiSource edged higher after expanding an agreement with Microsoft. Vertiv soared on surging sales, and GE Vernova reported a large order book, though its stock dipped.

Energy Prices Add a Twist

The gas angle arrived against a volatile energy backdrop, with crude settling back above $100 a barrel after Yemen's Houthis claimed an attack on a Saudi refinery. Energy was among the best-performing S&P 500 sectors, while utilities, by contrast, were among the worst performers, as long-dated Treasury yields climbed.

Not everyone expects the boom to run forever, with one economist warning of an eventual AI capex bust, though probably not for a few more years.