The data center boom in the United States is expected to significantly increase natural gas demand, leading to billions of dollars in infrastructure investments. According to Goldman Sachs, surging electricity consumption from data centers could drive a 10% increase in natural gas demand by 2030. This surge in demand is seen as a positive development for pipeline operators like Kinder Morgan and Williams Companies, as they will need to expand their infrastructure to accommodate the growing needs of data centers.
Goldman Sachs analysts have identified Kinder Morgan and Williams Companies as two of the best-positioned natural gas infrastructure operators to benefit from the growth in data center power demand. The investment bank currently rates Kinder Morgan as a buy with a stock price target of $20, implying an 8% upside potential from the current price. On the other hand, Williams Companies is rated as neutral with a price target of $37, suggesting a 4% downside from the last closing price.
Projected Earnings Upside for Pipeline Operators
Goldman Sachs forecasts that Kinder Morgan and Williams Companies could see a 2% earnings upside over the bank’s current estimates through 2027. This is due to their favorable scale and geographical positioning, allowing them to capture a significant percentage of the new pipeline capacity addition estimate. Kinder Morgan, with a 40% share of natural gas pipelines in the U.S. and a strong presence in Texas, is expected to benefit from the data center boom. Williams Companies, with a 33% market share and exposure in the Southeast, including the largest data center market in Northern Virginia, is also well-positioned to capitalize on the increased demand for natural gas.
According to Goldman Sachs, Kinder Morgan could see an increase in earnings before interest, taxes, depreciation, and amortization of up to $490 million by 2030, while Williams Companies could see a $410 million increase during the same period. This growth is attributed to the additional demand for natural gas generated by data centers.
Production Advantage for EQT Corp.
In addition to pipeline operators, natural gas producers like EQT Corp. are also expected to benefit from the data center boom. As the largest natural gas producer in the U.S., responsible for about 6% of total production, EQT Corp. is well-positioned to capture a meaningful share of the increased gas demand. Goldman Sachs believes that EQT Corp.’s cost advantages and inventory position the company as a leader in the U.S. natural gas market.
Goldman Sachs rates EQT Corp. as a buy with a stock price target of $43, implying a 7% upside potential from the current price. The investment bank highlights the potential increase in power demand from data centers and its positive impact on load growth, which could create a need for incremental gas-based generation. EQT Corp. is poised to benefit from this trend, leveraging its competitive positioning in the market.
The data center boom in the U.S. is expected to drive significant growth in natural gas demand, benefiting pipeline operators like Kinder Morgan and Williams Companies, as well as natural gas producers like EQT Corp. These companies are well-positioned to capitalize on the opportunities presented by the surge in electricity consumption from data centers, leading to potential earnings upside and increased infrastructure investments in the coming years.