Southern Company (NYSE:SO) has quietly turned into one of the more interesting AI infrastructure stories in the utility sector. The stock is up nearly 12% year to date, ahead of the S&P 500’s near 7% gain, and that run has come alongside a stack of large-load contracts, a marquee 25-year power deal with OpenAI, and an $81 billion capital plan built to serve years of data center growth. SO was also among the best utility stocks to buy according to hedge funds.
The question for investors is how much of the next five years of earnings growth this trend can carry.
Data Centers Are Already Showing Up In The Numbers
Southern’s Q1 data center sales grew 42% year over year, and wholesale electric revenue jumped almost 30%. The company has beaten EPS estimates 75% of the time over the last two years and beaten revenue estimates 63% of the time, a track record that gives some weight to management’s long-term growth targets.
Longer term, management is guiding for roughly 10% electric sales growth from 2026 through 2030, and 7-9% adjusted EPS growth through 2028 and beyond.
The OpenAI Deal And The Large-Load Pipeline
Georgia Power, Southern Company’s Georgia utility, signed a 25-year deal to power OpenAI’s planned $30 billion data center in Effingham County, Georgia, which needs about 3.2 GW starting in 2028.
This deal sits inside a much bigger pipeline. Southern now has more than 11 GW of contracted large-load customers, up about 2 GW from the prior quarter. Another 6 GW of projects are in the finalizing stage and 6 GW more are in late-stage development, putting 23 GW either contracted or close to it. Beyond that, the company points to more than 75 GW in its prospective large-load pipeline. Southern’s large-load contracts include minimum bills covering at least 100% of the annual incremental cost to serve each customer, termination payments tied to remaining contract costs, and collateral requirements based on customer creditworthiness.
An $81 Billion Capex Plan Backed By Cheap Federal Financing
Southern’s five-year capital plan now stands at $81 billion, up 28% (about $18 billion) since January 2025. The plan includes 10 GW of new state-regulated generation under construction and more than 500 miles of new transmission lines. About half of the new capacity mix comes from purchased power, with the rest split across renewables, storage, and gas-fired generation.
More than 90% of Southern’s earnings come from state-regulated electric and gas utilities, which makes the earnings base more predictable than merchant power peers exposed to wholesale price swings. That regulated structure is central to the long-term bull case: Southern isn’t chasing merchant power spreads on the back of AI demand, it’s converting that demand into rate-based infrastructure with contractual protections built in.
Risks To Watch
The biggest swing factor is whether the large-load pipeline converts into actual energized demand on schedule. A pipeline screenshot doesn’t generate EPS. Contracts have to turn into built infrastructure, regulatory approval, and real electricity consumption. Any slowdown from data center customers on construction timelines, chip supply, or financing could cool the AI power premium built into the stock.
Regulatory and affordability pressure is the second risk. Georgia and Alabama regulators still have to sign off on how the $81 billion capex plan flows through to customer bills, and they won’t rubber-stamp unlimited spending just because data centers want power. Debt is also a factor to watch. Southern’s net debt has run above $75 billion, with net debt/EBITDA near 5.17x, among the higher leverage levels in the utility sector, which makes the stock more sensitive to interest rate moves than lower-debt peers.
Pixabay/Public Domain
While we acknowledge the risk and potential of SO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SO and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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