Bank of America’s Top Stock Picks Fueling AI Growth
Bank of America anticipates continued market growth driven by artificial intelligence in 2026, specifically highlighting the energy and utilities sector as a key beneficiary. The bank’s analysts have identified several top stock picks poised to capitalize on the surging demand for power fueled by the proliferation of data centers. Their research points to a sustained increase in electricity consumption due to the expansion of AI and the associated data infrastructure. This trend is expected to drive substantial growth within the energy and utilities sector, presenting attractive investment opportunities for discerning investors.
Bank of America’s Top Stock Picks for 2026
Bank of America’s research focuses on four key companies within the energy and utilities landscape, each selected for its potential to benefit from the anticipated AI-driven expansion. The bank’s analysis reveals a strong conviction in these stocks’ ability to perform well in a market increasingly reliant on data processing and storage, underlining the sector’s importance in supporting the next technological wave. The following companies were identified as top picks, each with unique characteristics and potential for growth.
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Public Service Enterprise Group (PSEG)
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Ticker: PEG
2025 Return: -6%
Commentary: Public Service Enterprise Group stands out as Bank of America’s top pick for regulated energy and utilities stocks. The company, primarily involved in electricity and natural gas distribution, offers a blend of stability and growth prospects. Despite experiencing a slight year-to-date decline, Bank of America believes PSEG’s established assets and position within a regulated market will provide investors with significant upside potential as electricity prices rise due to heightened demand. The stock is targeted at $95 by Bank of America based on these expectations.
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Alliant Energy Corporation (LNT)
Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images
Ticker: LNT
2025 Return: +10%
Commentary: Alliant Energy is positioned as another strong investment opportunity, and is a natural gas and electricity producer largely servicing the Midwestern United States. Bank of America expects further growth for the company following a solid performance this year, with a $74 price target and a “Buy” rating. The company’s location in areas with a high concentration of data centers represents a significant strategic advantage, further bolstering its prospects.
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Sempra (SRE)
Technicians of RTE (Electricity Transport Network) prepare to work on high voltage power lines near Aix en Provence Thomson Reuters
Ticker: SRE
2025 Return: -1%
Commentary: Sempra, an energy infrastructure firm operating primarily in electricity and natural gas markets, is identified as a promising investment. Based in San Diego, the company caters to customers in California and Texas, two states experiencing considerable growth due to numerous data centers. Despite a recent dip, shares have risen 18% over the past six months, and Bank of America believes Sempra can benefit from the stability of California’s data center market and Texas’s expanding potential. The bank’s "Buy" rating and $99 price target reflect this view.
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Southwest Gas (SWX)
Germany is constructing a liquefied natural gas import terminal at Wilhelmshaven in Lower Saxony. Sina Schuldt/picture alliance via Getty Images
Ticker: SWX
2025 Return: +14%
Commentary: Southwest Gas, involved in producing, transporting, and distributing natural gas, has demonstrated strong performance in 2025 and is expected to continue thriving. The bank targets $84 a share and maintains a "Buy" rating, recognizing the company’s strategic location in California, Arizona, and Nevada – key markets benefiting from the data center boom. The bank’s assessment focuses on the company’s advantageous position in these regions, underscoring the critical role they play in supporting the growing demand for energy.
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Xcel Energy (XEL)
High-tension electrical power lines are seen near the Golfech nuclear plant on the border of the Garonne River between Agen and Toulouse Thomson Reuters
Ticker: XEL
2025 Return: +10%
Commentary: Xcel Energy, based in Minneapolis, and serving clients in several nearby states including Colorado, Michigan, and North Dakota, has performed well in 2025. Bank of America projects a $84 share target and maintains a “Buy” rating. Xcel’s projections of 6-8%+ growth through the end of the decade factor in data center development on a rational backlog of 1GW under construction, 2GWs in the high probability pipeline, and greater than 20GWs in the additional pipeline.
The Bank of America’s analysis highlights a compelling investment thesis within the energy and utilities sector, driven by the undeniable impact of AI and the subsequent surge in data center demand. These four companies represent strategically positioned investments, poised to capitalize on this pivotal shift and deliver solid returns for investors.
