# Utilities lag AI stocks by 330 bps, Wells Fargo eyes AI‑linked upside

**Published:** 2026-07-28T08:28:27.678Z  
**Topic:** S P 500  
**Sentiment:** neutral  
**Publisher:** TrendWatcher — https://www.trendwatcher.in/article/cc7185fb-cd75-4947-9939-595f18634848

Utilities underperform AI‑driven S&P 500 by 330 basis points YTD, but Wells Fargo flags dividend‑rich names like Exelon and FirstEnergy as next AI

Utilities fell 330 bps behind the AI‑fuelled S&P 500 rally YTD, prompting Wells Fargo to spotlight dividend‑paying utilities as the sector’s next AI beneficiaries【2】. The gap matters because a sustained AI spend surge could drive new power‑ and cooling‑infrastructure demand, offering growth upside for otherwise defensive utilities.  

| At a glance | |
|---|---|
| Utilities YTD performance | +7.5% vs S&P 500 +9.8% (330 bps lag)【2】 |
| Exelon YTD stock gain | +7% with 3.6% dividend yield【2】 |
| FirstEnergy YTD stock gain | ~+10% with 3.8% dividend yield【2】 |
| Data‑center power need 2025‑2027 | 31 GW → 66 GW (doubling)【3】 |

## Utilities lag AI‑heavy equities  

The S&P 500’s AI‑driven run has outpaced the utilities sector by roughly 3.3 percentage points this year, a gap quantified by Wells Fargo analysts as a 330‑basis‑point lag【2】. The underperformance stems from utilities’ defensive profile and regulatory headwinds, which have kept investors focused on higher‑growth AI builders. Yet the same AI expansion is creating new demand for electricity, cooling and real‑estate capacity needed to host dense compute clusters. Industry estimates project U.S. data‑center power needs to more than double from 31 GW in 2025 to 66 GW by 2027【3】, leaving a projected 49‑GW supply shortfall. This mismatch suggests utilities could capture a larger share of AI‑related capex as the technology moves from pure compute to the supporting infrastructure layer.

## Wells Fargo’s utility picks  

Wells Fargo highlighted “out‑of‑favor” utilities that combine dividend yields above market averages with exposure to AI‑linked infrastructure. Exelon, with a 3.6% yield, posted a 7% YTD gain and beat Q1 earnings expectations (91 cents vs. 88 cents consensus) while reaffirming full‑year guidance of $2.81‑$2.91 per share【2】. FirstEnergy, yielding 3.8%, is up nearly 10% YTD and reported a 32% rise in contracted data‑center demand, positioning it to benefit from new power generation projects in West Virginia【2】. Both firms are seen as poised to reap “re‑rating upside” once regulatory clarity from FERC and PJM emerges, with some clarity expected as early as November【2】.

## AI’s operational impact on utilities  

Beyond capital spending, AI is reshaping utility operations. Predictive maintenance, AI‑driven demand forecasting, and automated outage response can lower costs and improve reliability, while AI‑enabled chatbots enhance customer service【1】. Moreover, AI assists renewable integration by forecasting weather and production, helping balance intermittent sources on the grid【1】. These efficiency gains could boost margins and support higher dividend payouts, reinforcing the appeal of utilities as a defensive yet growth‑linked play.

## What to watch  

- **FERC/PJM conference** on PJM’s future structure (scheduled Thursday) – outcomes could clear regulatory overhangs for utilities tied to the regional grid【2】.  
- **Data‑center power demand reports** for Q3 2026 – a faster‑than‑expected rise would accelerate utility capex forecasts.  
- **Earnings releases** of highlighted utilities (Exelon, FirstEnergy) – beats or misses versus consensus will test the re‑rating thesis.

The divergence between AI‑heavy equities and utilities creates a potential rotation opportunity, but the sector’s upside hinges on regulatory clarity and the pace of AI‑driven infrastructure spending.

## Sources
1. Wavebrowsernews — ['Out-of-favor' utilities could be the next beneficiaries of the AI ...](https://wavebrowsernews.com/news/out-of-favor-utilities-could-be-the-next-beneficiaries-of-the-ai-trade-and-they-pay-dividends-wells-fargo-says?id=54c6a874-9ebc-4203-a7c5-5b877ca37d96&isExternal=true)
2. CNBC — [‘Out-of-favor’ utilities could be the next beneficiaries of the AI trade – and they pay dividends, Wells Fargo says](https://www.cnbc.com/2026/07/22/utilities-that-could-be-the-next-beneficiaries-of-ai-trade.html)
3. Trendwatcher — [Utilities poised as next AI trade beneficiaries after lagging S&P 500](https://www.trendwatcher.in/article/cc7185fb-cd75-4947-9939-595f18634848)
4. Markets — [The Unsung Powerhouse: How Utilities Are Silently Dominating the AI Boom](https://markets.financialcontent.com/talkmarkets/article/marketminute-2025-10-15-the-unsung-powerhouse-how-utilities-are-silently-dominating-the-ai-boom)

---
Cite as: TrendWatcher, "Utilities lag AI stocks by 330 bps, Wells Fargo eyes AI‑linked upside", https://www.trendwatcher.in/article/cc7185fb-cd75-4947-9939-595f18634848