Top Utilities Stocks to Watch: HSBC’s Preferred Picks

Investing.com -- HSBC has identified five preferred utilities stocks positioned to benefit from surging electricity demand driven by data centers and artificial intelligence infrastructure. The investment bank rates all five companies as Buy, citing above-average growth prospects and strong execution capabilities in an evolving power landscape.

The utilities sector is experiencing a transformation as electricity demand accelerates, particularly in regions attracting large data center developments. HSBC's preferred stocks demonstrate rate base growth rates well above historical averages, with several companies projecting demand increases of 40% to 80% by 2030. The bank's selections span integrated electric utilities, transmission-focused operators, and diversified energy infrastructure companies across multiple U.S. markets.

1. Entergy (ETR) - HSBC rates Entergy as Buy with a target price of USD123.50, implying 17.5% upside. The integrated electric utility operates in Louisiana, Arkansas, Texas, Mississippi and New Orleans. HSBC forecasts 2026-30 rate base growth of 16% and earnings per share growth of 13%. The company's USD67 billion investment plan for 2026-30 includes plans to add approximately 30GW of new capacity through 2035. Louisiana drives growth with approximately 60% demand increase expected by 2030. HSBC considers execution risk low, citing the company's early supply chain management and standardized processes.

2. Pinnacle West (PNW) - HSBC rates Pinnacle West as Buy with a target price of USD119.50, implying 15.5% upside. The Arizona-based integrated utility is forecasted to achieve 2026-30 rate base growth of 12% and earnings per share growth of 13%. The company has recorded growth rates of 5% to 10% in the last six quarters and forecasts approximately 45% demand increase by 2030. HSBC notes execution risk as medium to high due to past regulatory challenges, but expects material improvements following a pivotal ratemaking decision before year-end 2026.

3. NextEra (NEE) - HSBC rates NextEra as Buy with a target price of USD103.00, implying 29.1% upside. The company targets capital expenditures of USD295-325 billion over 2025-32, with USD185-225 billion allocated to NextEra Energy Resources. HSBC forecasts 2026-32 earnings per share growth of 10% and sees the company as uniquely positioned with scale advantages and technology leadership. NextEra Energy Resources is on track for over 14GW of gas and renewables additions per year in 2026-32.

4. NiSource (NI) - HSBC rates NiSource as Buy with a target price of USD49.50, implying 16.0% upside. The integrated electric and gas utility operates in Indiana and multiple other states. The company has approximately 9GW of large load pipeline with approximately 4GW already signed. HSBC forecasts 2026-30 rate base growth of 11% and earnings per share growth of 10%. The USD28.6 billion investment plan for 2026-30 allocates approximately 40% to generation. HSBC considers execution risk low, citing the company's Generation Company construct for efficient data center development.

5. Sempra (SRE) - HSBC rates Sempra as Buy with a target price of USD97.50, implying 16.9% upside. The wires and pipes utility operates in California and Texas with a small LNG business. Texas operations drive growth with 2026-30 rate base growth of 18%. The company's USD65 billion base capital plan for 2026-30 includes approximately USD48 billion for Texas, with USD10 billion in incremental capital opportunities identified. HSBC forecasts 48% load increase by 2030 and more than doubling by 2035 in Texas operations.

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