AI Demand Has Wall Street Snatching Up Utility Companies

The goal, as The New York Times (NYT) reported Thursday (July 17), is to benefit from the rising demand for electricity from data centers.

Among the investment groups engaged in this effort is BlackRock, the world’s largest asset manager, which wants to acquire Minnesota Power. That utility owns several power plants and thousands of miles of power lines that could help artificial intelligence (AI) companies secure energy for their data centers.

However, this deal is facing pushback, with a state administrative law judge recommending this week late Tuesday that Minnesota utility regulators deny the proposed acquisition.

Another investment group, private equity firm Blackstone, announced an agreement in May to purchase Albuquerque-based TXNM Energy, which provides electricity to 800,000 residential and business customers in New Mexico and Texas.

These efforts have drawn criticism from consumer and progressive groups, who argue investment firms shouldn’t own electric utilities as they typically want to maximize profits, often by burdening the company’s finances with debt. This approach, the critics argue, could lead to much higher rates and worse service.

“No one in northern Minnesota wants higher utility bills solely to line the pockets of Wall Street-based private equity firms,” said Nichole Heil, senior researcher and campaign director for climate at the Private Equity Stakeholder Project.

The report notes that electricity rates are rising around the country, in part because of upgrades to address climate change, and in part because of increased demand from AI data centers.

The news comes days after the announcement that Google, Meta, Blackstone and CoreWeave were planning to spend hundreds of billions of dollars to construct new AI data centers

Google told PYMNTS Tuesday (July 15) that it plans to spend $25 billion over the next two years on data centers and AI infrastructure in the PJM electric grid region, a coverage area that runs from New Jersey to North Carolina and Illinois to the nation’s capital.

“Google’s investments announced today will increase energy abundance and empower Americans with the skills needed to thrive in the AI era,” Alphabet and Google President Ruth Porat said in a statement provided to PYMNTS.

One day earlier, Meta CEO Mark Zuckerberg wrote on a Facebook post that his company would invest “hundreds of billions of dollars into compute to build superintelligence.” Compute refers to computational power, covering chips, servers and connectivity in data centers.