In this article, we are going to discuss the best utility stocks to invest in according to hedge funds.
The utility sector emerged as one of the biggest winners of the AI boom. Major utility companies all over the country signed hefty contracts with hyperscalers to power their data centers, leading to commitments of billions of dollars of investments in the coming years.
However, bullish sentiment in the sector appears to have cooled following recent fears of an AI bubble, with investors concerned about whether the promised billions in investments will materialize. Moreover, recent earnings reports from these power companies have made investors realize that the expected growth in demand may actually come much more slowly than initially expected.
As a result, while the utilities group outperformed the market for most of the year, it has recently witnessed a pullback. The S&P Utilities index is now up 12.41% since the beginning of 2025, against gains of 15.44% by the overall S&P 500.
With that said, here are the Best Utility Stocks to Invest in.
Our Methodology
To collect data for this article, we reviewed companies in the utility sector and shortlisted those with the highest number of hedge fund investors as of the end of Q3, 2025, according to the Insider Monkey database. The following are the Best Utility Stocks to Buy According to Hedge Funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
11. Dominion Energy, Inc. (NYSE:D)
Number of Hedge Fund Investors: 35
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 December 16, Morgan Stanley analyst David Arco trimmed the firm’s price target on Dominion Energy, Inc. (NYSE:D) from $65 to $62, but maintained its ‘Equal Weight’ rating on the shares. The revised target still represents an upside potential of 4.5%, as of the writing of this piece. The analyst noted in his year-ahead vote that the utilities sector’s performance will depend heavily on growth from data centers and better growth in the coming year.
Earlier on December 11, JPMorgan also lowered its price target on Dominion Energy, Inc. (NYSE:D) from $62 to $59, and kept an ‘Underweight’ rating on the shares. The revised price target comes as part of the firm updating models in the North American utilities sector.
Dominion Energy, Inc. (NYSE:D) enjoys a unique position in Virginia’s ‘Data Center Alley’ and has connected 450 data centers already, with over 25% of its sales going to these power-hungry facilities in the state. Moreover, the company had approximately 47 GW of data-center supply in various stages of contracting as of September 2025, up from around 40 GW as of December 2024.
10. Eversource Energy (NYSE:ES)
Number of Hedge Fund Investors: 41
Eversource Energy (NYSE:ES) operates New England’s largest energy delivery system and serves customers in Connecticut, Massachusetts, and New Hampshire.
On December 12, JPMorgan lowered its price target on Eversource Energy (NYSE:ES) from $72 to $71, while maintaining an ‘Underweight’ rating on the shares. The revised target, still indicating an upside potential of almost 4% from the current share price, comes as the analyst firm updated models in the North American utilities group.
That said, BofA instead raised its price target on Eversource Energy (NYSE:ES) from $72 to $75 on December 5, while keeping its ‘Buy’ rating on the shares. The update comes after the firm hosted an investor trip to Eversource’s Cambridge underground substation and then met with the company’s CFO, John Moreira, to discuss the utility’s regulatory roadmap. As a result, BofA increased its EPS forecasts for Eversource for the 2026-29 period.
It is worth noting that last month, Eversource Energy (NYSE:ES) reaffirmed its 5-year capital plan of $24.2 billion through 2029. Moreover, the company continues to see additional capital investment opportunities of $1.5 billion to $2 billion within the forecast period.
Eversource Energy (NYSE:ES) also declared a quarterly dividend of $0.7525 per share on December 3 and currently boasts an impressive annual dividend yield of 4.43%, putting it among the 14 Best Utility Dividend Stocks to Buy Now.
9. CMS Energy Corporation (NYSE:CMS)
Number of Hedge Fund Investors: 42
CMS Energy Corporation (NYSE:CMS) is an energy company primarily operating in Michigan. The company operates through three segments: Electric Utility, Gas Utility, and NorthStar Clean Energy.
CMS Energy Corporation (NYSE:CMS) saw a modest revision on December 16 when Morgan Stanley lowered its price target on the stock from $76 to $71, but maintained an ‘Equal Weight’ rating on the shares. According to the analyst, the performance of the utilities sector will be heavily driven by data centers and growth upside next year.
Earlier on December 11, JPMorgan analyst Jeremy Tonet also trimmed the firm’s price target on CMS Energy Corporation (NYSE:CMS) from $85 to $80, while keeping an ‘Overweight’ rating on the shares. The adjusted target, which still indicates an upside potential of over 14% from the current share price, comes as the analyst firm revised models in the North American utilities sector.
That said, CMS Energy Corporation (NYSE:CMS) reported better-than-expected results in its third-quarter results last month. The company also slightly raised its 2025 adjusted earnings guidance to $3.56-$3.60 per share, up from $3.54-$3.60 previously. Moreover, the utility introduced its 2026 adjusted earnings guidance of $3.80-$3.87 per share and reaffirmed its long-term adjusted EPS growth of 6%-8%.
8. Edison International (NYSE:EIX)
Number of Hedge Fund Investors: 45
Edison International (NYSE:EIX) is one of the largest electric utility holding companies in America, focused on providing clean and reliable energy and energy services through its independent companies.
Morgan Stanley analyst David Arcaro reduced the firm’s price target on Edison International (NYSE:EIX) from $64 to $59 on December 16, but maintained its ‘Underweight’ rating on the shares. The analyst noted that the utility sector’s performance will be heavily driven by data centers and growth upside in 2026, given the billions of dollars of investment poured into the industry by Big Tech. The analyst firm advised investors to favor utilities with exposure to data center demand growth and avoid companies facing heavier affordability scrutiny, given that 2026 is an election year.
Earlier on December 12, JPMorgan also trimmed its price target on Edison International (NYSE:EIX) from $67 to $65, as the firm revised models in the North American utilities sector. However, the analyst firm maintained its ‘Neutral rating on the shares.
In more positive news, Edison International (NYSE:EIX) reiterated its commitment to shareholders on December 11 by raising its quarterly dividend by 6% to $0.8775 per share. With an impressive annual dividend yield of 6.02%, EIX is included among the 15 Dividend Stocks Paying 4%+ Yield in 2025.
7. Xcel Energy Inc. (NASDAQ:XEL)
Number of Hedge Fund Investors: 49
Xcel Energy Inc. (NASDAQ:XEL) engages in the generation, purchasing, transmission, distribution, and sale of electricity in the United States. It operates through the Regulated Electric Utility and Regulated Natural Gas Utility segments.
On December 16, Morgan Stanley lowered its price target on Xcel Energy Inc. (NASDAQ:XEL) from $84 to $79, while keeping an ‘Equal Weight’ rating on the shares. The analyst noted that the performance of the utilities sector will be driven by the heavy data center demand growth next year, but also cautioned that the rising electricity bills could increase political and regulatory risk, especially given the midterm elections next year.
Xcel Energy Inc. (NASDAQ:XEL) received another significant blow on December 16 when the Attorney General of Texas, Ken Paxton, sued the utility for ‘blatant negligence’ in causing a massive wildfire in 2024. Responsible for three deaths and over $1 billion in damages, the Smokehouse Creek fire was the largest wildfire in the state’s history.
The lawsuit seeks to compensate for economic losses and civil penalties for state law violations. Moreover, it seeks a court order to require Xcel Energy Inc. (NASDAQ:XEL) to take corrective action to prevent a similar tragedy in the future. However, the utility responded by expressing disappointment with the lawsuit and stating that it has established a fund for wildfire victims, with $361 million in compensation already paid.
6. Entergy Corporation (NYSE:ETR)
Number of Hedge Fund Investors: 56
Next on our list of the Best Utility Stocks is Entergy Corporation (NYSE:ETR), an integrated energy company that provides electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi, and Texas.
On December 16, Morgan Stanley lowered its price target on Entergy Corporation (NYSE:ETR) from $91 to $86, while maintaining an ‘Equal Weight’ rating on the shares. With Big Tech currently pouring billions of dollars into the ongoing AI race, the analyst believes that the utility sector’s performance will be heavily driven by data centers and growth upside next year.
To ensure it can keep up with ballooning demand, Entergy Corporation (NYSE:ETR) broke ground earlier this month to begin construction of two new combined-cycle combustion turbine generation facilities. Recently approved by the Louisiana Public Service Commission, the power plants will have a combined capacity of 1.5 GW and help power Meta’s planned data center in the state. The 15-year agreement between Entergy and the tech hyperscaler is projected to save customers approximately $650 million and help keep bills lower across Louisiana. Both projects are expected to be operational by late 2028.
Entergy Corporation (NYSE:ETR) was also recently included in our list of the 11 Energy Stocks to Buy for a Retirement Portfolio.
5. The Southern Company (NYSE:SO)
Number of Hedge Fund Investors: 58
The Southern Company (NYSE:SO) is one of the largest producers of electricity in the United States and the largest wholesale provider in the Southeast. Together with its subsidiaries, the company delivers clean, safe, reliable, and affordable energy to its 9 million customers.
On December 17, UBS lowered its price target on The Southern Company (NYSE:SO) from $98 to $94, while maintaining a ‘Neutral’ rating on the shares. The adjusted price target still represents an upside potential of over 7% from the current share price.
The Southern Company (NYSE:SO) also received a blow earlier on December 16 when Morgan Stanley downgraded the stock from ‘Equal Weight’ to ‘Underweight’, as part of the analyst firm’s 2026 outlook for the utilities sector. Morgan Stanley also reduced its price target for SO from $97 to $81. The analyst noted that the utility sector’s performance will be driven by data centers and growth upside next year and cautioned investors to avoid stocks that carry a high regulatory and political risk, given that 2026 is an election year.
JP Morgan also trimmed its price target on The Southern Company (NYSE:SO) from $104 to $93 on December 15, as part of the firm updating the company’s model. However, the analyst firm maintained its ‘Neutral’ rating on the shares.
4. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Investors: 72
With a market cap of over $168 billion as of the writing of this article, NextEra Energy, Inc. (NYSE:NEE) is the most valuable utility company in the world. The company boasts a diverse mix of energy sources, including natural gas, nuclear, renewable energy, and battery storage.
On December 17, UBS analyst William Appicelli trimmed the firm’s price target on NextEra Energy, Inc. (NYSE:NEE) from $94 to $91, while maintaining a ‘Buy’ rating on the shares. Earlier on December 16, Morgan Stanley also lowered its price target on NEE from $97 to $95 while keeping its Overweight rating.
NextEra Energy, Inc. (NYSE:NEE) CEO John Ketchum announced earlier this month that the company plans to build 15 GW of new power generation for data center hubs by 2035. As the utility witnesses a surge in power demand driven by data centers, it raised its 2025 adjusted earnings guidance to $3.62-$3.70 per share, from $3.45-$3.70 previously. The company also updated its 2026 adjusted EPS guidance to $3.92-$4.02 from $3.63-$4.00 previously. NextEra is targeting long-term adjusted EPS growth of at least 8% through 2035, based on the expected 2025 outlook.
NextEra Energy, Inc. (NYSE:NEE) is known for its strong dividend growth history, and earlier this month, the company reaffirmed its target to raise dividends per share at roughly 10% per year through 2026, starting from a 2024 base. After that, the utility expects per-share dividend growth of around 6% annually in 2027 and 2028, off a 2026 base.
NextEra Energy, Inc. (NYSE:NEE) was recently included on our list of the 10 Best Renewable Energy Dividend Stocks to Buy Now.
3. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Investors: 79
PG&E Corporation (NYSE:PCG) provides natural gas and electric service to residential and business customers in northern and central California.
On December 16, Morgan Stanley slightly cut its price target on PG&E Corporation (NYSE:PCG) from $21 to $20, but maintained an ‘Equal Weight’ rating on the shares. With Big Tech pouring hundreds of billions of dollars into the AI race, the analyst firm highlighted that the performance of the utilities group will be heavily driven by data centers and growth upside in 2026. The analyst advised investors to consider utilities with exposure to data center demand growth, and cautioned against companies facing heavier affordability scrutiny, given that 2026 is an election year.
Earlier on December 12, JPMorgan also trimmed its price target on PG&E Corporation (NYSE:PCG) from $22 to $21, still indicating an upside potential of almost 33% from the current share price. The firm also maintained its ‘Overweight’ rating on the shares.
On a positive note, PG&E Corporation (NYSE:PCG) doubled its quarterly dividend to $0.05 per share on December 12, payable on January 15, 2026, to all shareholders as of the December 31 record. PCG currently boasts an annual dividend yield of 1.26%.
2. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Investors: 91
Constellation Energy Corporation (NASDAQ:CEG) is the largest producer of carbon-free energy in the US, with over 32.4 GW of generating capacity consisting of nuclear, wind, solar, natural gas, and hydroelectric assets.
Constellation Energy Corporation (NASDAQ:CEG) received a boost on December 17 when UBS raised its price target on the stock from $385 to $420, while keeping a ‘Buy’ rating on the shares. The revised target indicates an upside potential of over 16% from the current share price.
However, a day earlier, JPMorgan lowered its price target on Constellation Energy Corporation (NASDAQ:CEG) from $422 to $410, but maintained an ‘Overweight’ rating on the shares. The adjustment comes as the analyst firm updated its model post the third-quarter report.
Constellation Energy Corporation (NASDAQ:CEG) announced earlier this month that it had reached an agreement with the U.S. Department of Justice on the conditions required to complete its previously announced acquisition of Calpine Corporation, marking a significant step forward for the company. One of the largest blockbuster deals in American power industry history, the $16.4 billion acquisition is expected to add $2 billion to Constellation’s free cash flow annually.
The deal will also add significantly to Constellation Energy Corporation (NASDAQ:CEG)’s nuclear energy portfolio, which is especially important in the current AI landscape, where we have multiple hyperscalers signing nuclear energy deals with utilities to power their data centers.
1. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Investors: 112
Topping our list of the Best Utility Stocks to Buy Now is Vistra Corp. (NYSE:VST), the largest competitive power generator in the US. The company boasts a capacity of approximately 41,000 MW, powered by a diverse portfolio that includes natural gas, coal, nuclear, solar, and battery energy storage facilities.
On December 16, Morgan Stanley analyst David Arcaro raised the firm’s price target on Vistra Corp. (NYSE:VST) from $225 to $228, while keeping an ‘Overweight’ rating on the shares. According to the analyst, the performance of the utility sector will be heavily driven by data centers and growth upside next year, given the rapidly increasing demand from the ongoing AI race between hyperscalers. The analyst favored utilities with exposure to data center demand growth, and cautioned against companies facing heavy affordability scrutiny, given that 2026 is an election year.
In another positive development for the stock, it was revealed on December 2 that S&P has upgraded Vistra Corp. (NYSE:VST) to investment grade. VST’s long-term rating was raised from BB+ to BBB-, driven primarily by the utility’s deal to sell power from a nuclear plant, its purchase of natural gas assets, and strong hedging of future production.
That said, on December 16, JPMorgan analyst Jeremy Tonet trimmed the firm’s price target on Vistra Corp. (NYSE:VST) from $249 to $233, but kept an ‘Overweight’ rating on the shares. The revision comes as the firm updated the company’s model following the Q3 report, in which Vistra fell below estimates for both earnings and revenue.
While we acknowledge the potential of VST to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than VST and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: Retirement Stock Portfolio: 11 Energy Stocks to Buy and 14 Best Utility Dividend Stocks to Buy Now.
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