Best stocks: After last week's outperformance, there is a new 2025 sector champ

Dominion Energy (D) is highlighted as a prime beneficiary of the accelerating AI-driven data center buildout, particularly in Northern Virginia's 'Data Center Alley,' which handles 70% of global internet traffic. The utility, recently added to a 'Best Stocks' list after exceeding earnings expectations, supplies significant power to major tech clients like Amazon AWS and Microsoft Azure, holding 9 GW in existing contracts and 5 GW in new agreements. Key catalysts include a pending rate increase proposal, expected in September, and its substantial 3GW Coastal Virginia Offshore Wind project, 60% complete and slated for 2026. This underscores a broader trend where the utility sector is demonstrating strong momentum and outperforming tech, driven by the foundational energy requirements of the AI revolution.

Analysis

Dominion Energy (D) is positioned as a direct beneficiary of the secular growth in data center power demand, primarily driven by the artificial intelligence buildout. The company's strategic location in Northern Virginia's 'Data Center Alley,' a region handling approximately 70% of global internet traffic, provides a significant structural advantage. This is substantiated by its existing 9 GW of data center load under service contracts and an additional 5 GW in newly signed agreements with key hyperscalers including Amazon, Meta, Microsoft, and Google. Amazon's commitment alone, with a planned $35 billion investment by 2040, signals a durable and long-term demand profile. Fundamentally, the investment thesis is supported by a recent earnings report that beat both revenue and EPS expectations, leading management to reaffirm full-year guidance. An upcoming rate increase proposal, with a regulatory decision expected in September, presents a material near-term catalyst. Furthermore, the company's 3 GW Coastal Virginia Offshore Wind project, now 60% complete, enhances its capacity to meet this surging demand with a diversified and renewable energy source. Broader market technicals are also favorable, with the utility sector exhibiting superior momentum to technology, evidenced by 90% of utility stocks trading above their 200-day moving average compared to just 57% for tech.

Key Decisions for Investors

• Investors should recognize Dominion Energy as a direct play on the AI infrastructure theme, with its valuation underpinned by long-term power contracts with major technology firms in a critical geographic hub.
• The upcoming regulatory decision on a proposed rate increase in September is a key catalyst to monitor, as a favorable outcome could positively re-rate the stock.
• For risk management, a weekly close below the $50 price level, identified as a key technical pivot point near the 200-week moving average, would warrant a reassessment of the bullish thesis.
• Income-focused investors may find the 4.4% dividend yield attractive, providing a return while the long-term growth from data center and renewable energy projects unfolds.