The surge in electricity consumption from data centers is projected to lead to a significant increase in natural gas demand by 3.3 billion cubic feet per day by 2030. This represents a 10% rise from the current 35 bc/d consumed in the U.S. for electric power generation. According to Goldman Sachs, this additional demand presents a strong tailwind for pipeline operators such as Kinder Morgan and Williams Companies. As a result of the data center boom, these companies could see $7.4 billion in pipeline investments, boosting capacity by 6.1 bcf/d through 2030.
Goldman Sachs views Kinder Morgan and Williams Companies as two of the best positioned natural gas infrastructure operators to capitalize on the growth in data center power demand. Kinder Morgan, with a 40% share of natural gas pipelines in the U.S. and a significant presence in Texas, is expected to benefit from the data center expansion in this region. Williams Companies, on the other hand, has a market share of 33% and strong exposure in the Southeast, including the largest data center market in Northern Virginia. Goldman projects that Kinder Morgan could see earnings before interest, taxes, depreciation, and amortization rise by up to $490 million by 2030, while Williams Companies could experience a $410 million increase during the same period.
In addition to pipeline operators, EQT Corp. is well positioned to capture a significant share of the increased gas demand resulting from data center power requirements. As the largest natural gas producer in the U.S., accounting for about 6% of total production, EQT Corp. stands to benefit from its cost advantages and inventory. Goldman Sachs believes that the rise in power demand from data centers could necessitate incremental gas-based generation, creating opportunities for companies like EQT Corp. to capitalize on this trend. The investment bank rates EQT Corp. as a buy with a stock price target of $43, indicating potential upside of about 7% from the closing price on Friday.
Goldman Sachs currently rates Kinder Morgan as a buy with a stock price target of $20, suggesting an 8% upside from the recent closing price. Conversely, the investment bank maintains a neutral stance on Williams Companies, setting a price target of $37, implying a 4% downside from the last closing price of $38.67. Overall, the pipeline operators, as well as natural gas producers like EQT Corp., are expected to see earnings upside in the coming years. Goldman projects a 2% earnings increase over its current estimates through 2027 for companies like Kinder Morgan and Williams Companies, given their favorable scale and geographic positioning to capture new pipeline capacity additions.
The data center boom is projected to have a significant impact on natural gas demand, creating opportunities for pipeline operators and gas producers to capitalize on the increasing electricity consumption from these facilities. Companies like Kinder Morgan, Williams Companies, and EQT Corp. are well positioned to benefit from this trend and could see growth in their earnings as a result of the expanding data center market.