Natural gas pipelines will profit from data center boom, Goldman says

The two largest pipeline operators in the U.S. are poised to benefit from the data center boom as rising natural gas demand requires billions of dollar of infrastructure investment, according to Goldman Sachs. Surging electricity consumption from data centers could increase natural gas demand by 3.3 billion cubic feet per day by 2030, about a 10% increase over the the 35 bc/d the U.S. currently consumes for electric power generation, according to Goldman forecasts. The additional demand is a solid tailwind for Kinder Morgan and Williams Companies , in particular, because pipelines will need to expand, according to the investment bank. To satisfy power users, the data center boom could drive $7.4 billion in pipeline investments to boost capacity by 6.1 bcf/d through 2030. “We see Kinder Morgan and Williams as two of the best positioned natural gas infrastructure operators to benefit from this growth in data center power demand,” Goldman’s team of analyst told clients in an April research report outlining the implications of the data center expansion. Goldman currently rates Kinder Morgan as buy with a stock price target of $20, implying 8% upside from Friday’s close of $18.57. The investment bank is neutral on Williams Companies with a price target of $37, implying 4% downside from the last close of $38.67 . KMI WMB YTD line kmi v. wmb The pipeline operators could see 2% earnings upside over Goldman’s current estimates through 2027, as they are well positioned in terms of scale and geography to capture “a meaningful percentage of our new pipeline capacity addition estimate.” Kinder Morgan has a 40% share of natural gas pipelines in the U.S. and a large position in Texas, which is expected to be a data center hot spot, according to Goldman. Williams Companies’ market share stands at 33%, with strong exposure in the Southeast, including the nation’s largest data center market in Northern Virignia. Kinder Morgan could see earnings before interest, taxes, depreciation and amortization rise by up to $490 million by 2030 while Williams Companies could see a $410 million increase, according to Goldman. On the production side, EQT Corp. is positioned to capture a meaningful share of the gas demand due to its cost advantages and inventory, according to Goldman. The company is the largest natural gas producer in the U.S., responsible for about 6% of total production. EQT YTD line eqt “We believe an increase in power demand from data centers and the subsequent impact on load growth could result in a need for incremental gas-based generation, where we believe EQT stands to benefit from its competitive positioning as a leader in the U.S.,” the Goldman team said. Goldman rates EQT a buy with a stock price target of $43, implying about 7% upside from Friday’s close of $40.27 . — CNBC’s Michael Bloom contributed to this report.