Goldman Sachs has singled out a handful of UK utility stocks as prime beneficiaries of the expected boom in electricity demand from data centres, as the rapid expansion of artificial intelligence and cloud computing reshapes the energy landscape. In a research note published this week, the investment bank highlighted National Grid and SSE as its top picks, arguing that the two companies are well positioned to capitalise on what it calls a 'structural shift' in power consumption.
According to Goldman Sachs analysts, UK data centre electricity demand could increase by as much as 500 per cent by the end of the decade, driven by the energy-intensive nature of AI training and the proliferation of hyperscale cloud facilities. The note estimates that data centres could account for up to 10 per cent of total UK electricity consumption by 2030, up from roughly 2 per cent today. This surge, the bank argues, will require significant investment in grid infrastructure and new generation capacity.
The report sent ripples through the London market on Monday, with National Grid shares climbing 1.8 per cent to 1,045p, while SSE gained 2.1 per cent to 1,892p. The wider FTSE 100 utilities index rose 1.3 per cent, outperforming the benchmark FTSE 100, which edged up 0.4 per cent to 8,245 points. Other utilities, including Drax and Centrica, also saw modest gains amid the sector-wide optimism.
For UK investors and pension holders, the implications are twofold. First, the growing demand from data centres could provide a long-term revenue tailwind for regulated utilities, potentially supporting dividend growth. Second, the required grid upgrades may lead to higher network charges for households and businesses, though analysts caution that the net impact on consumer bills remains uncertain. 'This is a structural growth story for the sector, but investors should be mindful of regulatory risks and the timeline for infrastructure delivery,' said one analyst who spoke on condition of anonymity.
The Goldman Sachs note comes as the UK government pushes ahead with plans to streamline planning approvals for data centres, designating them as 'nationally significant infrastructure' under the new Data Centre Act passed earlier this year. The policy shift is intended to attract billions of pounds in private investment, but critics warn it could exacerbate regional grid constraints and push up carbon emissions if new renewable generation is not built in tandem.