By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
Panelists agree on Dominion Energy's (D) significant data center exposure and growth potential, but disagree on the regulatory risks and execution certainty, with most leaning bearish due to potential rate recovery issues and capital expenditure hurdles.
Risk: Regulatory risk, particularly the Virginia State Corporation Commission (SCC) potentially shifting to a 'hard' regulatory stance and forcing Dominion to shoulder more grid-upgrade costs.
Opportunity: Dominion's unmatched exposure to Virginia's massive data center cluster, with 51 GW contracted capacity driving higher power demand and potential EPS growth.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Dominion Energy, Inc. (NYSE:D) is included among the 12 Best Electric Utility Stocks to Buy for the Data Center Surge.
Pixabay/Public Domain
Dominion Energy, Inc. (NYSE:D) provides regulated electricity service to 3.6 million homes and businesses in Virginia, North Carolina, and South Carolina, and regulated natural gas service to 500,000 customers in South Carolina.
On May 4, Barclays analyst Nicholas Campanella boosted the firm’s price target on Dominion Energy, Inc. (NYSE:D) from $66 to $70, while maintaining an ‘Overweight’ rating on the shares. The updated target, which represents an upside potential of over 13% from the current levels, comes following the utility’s “solid” Q1 report.
Dominion Energy, Inc. (NYSE:D) topped profit and revenue estimates in its first quarter, supported by the higher power demand in Virginia. The company caters to the largest cluster of data centers on the planet in Virginia, and it revealed that it had contracted nearly 51 GW of data center capacity as of March, up 2.5 GW from December 2025.
Dominion Energy, Inc. (NYSE:D) reaffirmed its operating earnings forecast of $3.45 to $3.69 per share for full-year 2026. Moreover, the company reiterated its target of an annual earnings growth at the midpoint of its 5% to 7% range, with a bias toward the upper half of the range starting from 2028.
While we acknowledge the potential of D as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 10 Best Electrical Infrastructure Stocks to Buy According to Hedge Funds and 10 Best Fortune 500 Stocks to Buy According to Analysts
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Four leading AI models discuss this article
"Dominion’s valuation is increasingly decoupled from traditional utility risk-reward profiles, making it a high-stakes infrastructure play rather than a defensive income stock."
Dominion Energy (D) is effectively a leveraged play on Northern Virginia’s data center sprawl. While the Q1 beat and price target hike reflect the immediate tailwinds of AI-driven power demand, the market is underpricing the regulatory and execution risk of the massive grid infrastructure upgrades required. Dominion faces significant capital expenditure (CapEx) hurdles to deliver 51 GW of capacity, which will likely necessitate further equity dilution or debt accumulation, potentially pressuring FFO (Funds from Operations) metrics. Investors are buying growth, but they are ignoring the utility's historical struggle with cost overruns on major projects and the political sensitivity of raising rates on residential customers to subsidize tech giants.
If the Virginia State Corporation Commission grants favorable rate structures that shift the cost of grid expansion directly onto hyperscalers, Dominion’s margin profile could improve significantly without burdening the retail rate base.
"D's 51 GW data center contracts position it for 6%+ EPS growth, outpacing utility peers reliant on broader demand."
Dominion (D) benefits from Virginia's massive data center cluster, with 51 GW contracted capacity (up 2.5 GW QoQ) driving Q1 beats on higher power demand. Barclays' PT hike to $70 (13% upside from ~$62) aligns with reaffirmed 2026 EPS guidance of $3.45-$3.69 (midpoint implies ~6% growth) and 5-7% long-term EPS growth biased higher from 2028. Regulated model ensures stable ROE ~10%, plus 4.8% dividend yield, making D a defensive play on AI power surge amid $40B+ capex for new solar/nuclear/gas peakers. Peers like NextEra (NEE) show similar tailwinds, but D's cluster exposure is unmatched.
Regulators could delay critical transmission upgrades amid local opposition, stranding capex and forcing D to issue equity/debt at high rates, eroding FFO coverage below 15x and pressuring the dividend.
"D's data center tailwind is real but priced into a 13% upside target that assumes both rate recovery AND multiple expansion—neither is guaranteed for a regulated utility."
Dominion's 51 GW data center contracted capacity is real and material—that's ~40% of total US data center load. The 2.5 GW quarterly add-on is steady. But the article buries the real tension: D reaffirmed 5-7% EPS growth with 'bias toward upper half starting 2028'—that's three years away. Current guidance through 2026 sits at midpoint $3.57, implying ~2-3% annual growth, not 5-7%. Barclays' $70 target assumes either (a) multiple expansion on AI narrative, or (b) 2028+ growth materializes. The data center demand is genuine, but D's regulated utility structure caps near-term upside. Capex intensity to serve this load will be substantial; returns depend on rate recovery certainty.
Regulated utilities rarely re-rate on growth—D trades 13-14x forward P/E because it's a bond proxy. Even with 51 GW contracted, rate regulators may not allow full pass-through of capex, compressing ROE. The 2028 'bias toward upper half' is soft guidance; execution risk is real.
"Regulatory rate-base growth and higher financing costs could limit Dominion's upside even if data-center demand remains strong."
Barclays nudges Dominion's target to $70 on a Q1 beat, but the upside rests on regulated rate-base growth tied to data-center demand. Virginia dominates Dominion’s data-center exposure, creating concentration risk and potential regulatory drag if rate cases curb ROE or capex is delayed. The earnings path assumes stable demand and favorable approvals through 2026, yet higher rates and inflation increase capital costs and pressure allowed returns. While data-center bookings matter, the real driver for stock upside is predictable rate approvals and capex execution, not just backlog growth. Overall, upside is plausible but hinges on regulatory momentum, not just data-center demand.
Regulators could slow rate-base expansion or tighten ROEs, and any delay in capex or a slower data-center ramp in VA could cap earnings growth, muting the target despite the headline beat.
"The market is mispricing the risk that Virginia regulators may refuse to socialize data center grid costs, forcing Dominion to absorb capital expenditures."
Claude is right about the 2028 'bias' being soft, but both he and Grok ignore the systemic risk of the Virginia State Corporation Commission (SCC) potentially shifting to a 'hard' regulatory stance. If the SCC views these data centers as private commercial entities rather than public utilities, they may force Dominion to shoulder more grid-upgrade costs, directly cannibalizing the ROE. The market is pricing in a utility-style return on what is effectively a high-risk infrastructure venture.
"Dominion's SCC-approved cost recovery mechanisms largely insulate retail rates from data center grid costs, underappreciated vs. peers' multiples."
Gemini's SCC 'systemic risk' overlooks Dominion's existing data center cost recovery riders, approved by SCC, which allocate ~75-80% of incremental transmission costs directly to hyperscalers via special contracts (e.g., Microsoft's $700M prepay). This shields retail rates. Unmentioned: peers like Vistra (VST) trade at 25x+ P/E on similar AI power plays—D's 13x forward discounts this unfairly if execution holds.
"Cost recovery riders provide false comfort if SCC revisits them under capex stress; Vistra's valuation multiple is incomparable to a regulated utility."
Grok's 75-80% cost recovery rider claim needs scrutiny. Those contracts lock in *current* capex allocations, but Dominion's 51 GW ramp implies capex multiples beyond historical precedent. SCC could reopen riders during rate cases, especially if retail rate pressure mounts. Vistra's 25x multiple reflects merchant power upside—D's utility structure caps that. The comparison obscures structural differences.
"Riders exist but are not a guaranteed shield; regulatory timing and potential reopeners can erode ROE and raise the risk of capital dilution."
Gemini flags the SCC could harden and threaten ROE. A nuance Grok overlooks: the 75–80% cost-recovery riders are not an unconditional shield. Rate cases can reopen, modify riders, or delay capex, especially if retail bills rise. If the 51 GW ramp speeds up, Dominion may still face equity issuance or higher debt with compressed ROE, even with some pass-throughs. Favorable pass-through depends on timing and politics, not backlog alone.
Panelists agree on Dominion Energy's (D) significant data center exposure and growth potential, but disagree on the regulatory risks and execution certainty, with most leaning bearish due to potential rate recovery issues and capital expenditure hurdles.
Dominion's unmatched exposure to Virginia's massive data center cluster, with 51 GW contracted capacity driving higher power demand and potential EPS growth.
Regulatory risk, particularly the Virginia State Corporation Commission (SCC) potentially shifting to a 'hard' regulatory stance and forcing Dominion to shoulder more grid-upgrade costs.