The build-out of data centers, not including IT hardware spending, is expected to cost about $1.7 trillion through the end of the decade, according to a study by McKinsey & Company. Southern Company (NYSE: SO) is uniquely positioned to benefit from that spending, driven by its geographic footprint, recent infrastructure completions, and a supportive regulatory environment.
The energy company serves 9 million customers and businesses through its subsidiaries, delivering electricity to Georgia, Alabama, and Mississippi, and natural gas to Georgia, Illinois, Virginia, and Tennessee.
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The stock has significantly underperformed both the S&P 500 and the State Street Utilities Select Sector SPDR ETF in total return over the past year. Here are three reasons why I think the stock is significantly oversold and presents an opportunity for investors.
More data centers in the South
The Southeast, particularly Georgia, has become a top destination for hyperscalers, such as Alphabet, Meta Platforms, and Microsoft, looking for lower land and energy costs.
Southern Company recently increased its 2026-2030 capital spending plan to $81 billion in anticipation of that demand. The company has already fully contracted 10 gigawatts (GW) for large-load customers, much of it from gas turbines that can be brought online quickly as data centers ramp up, and Southern is anticipating a staggering 75 GW pipeline of potential data center interest.
Commercial electricity sales, which data centers drive, are expected to grow by roughly 20% annually through the end of the decade, according to CFO David P. Poroch, powering Southern’s revenue growth.
The company’s huge nuclear advantage
The company was criticized in 2023 for huge cost overruns and delays for its Vogtle nuclear power plants near Waynesboro, Georgia. However, that spending is about to pay off. Data center operators have aggressive carbon-neutral goals but require steady reliability that solar and wind alone cannot provide without massive storage.
Southern completed Vogtle Units 3 and 4 in 2024, giving it the largest nuclear power station in the U.S. That’s a huge source of carbon-free energy that is attractive to tech giants who need constant power for artificial intelligence (AI) and cloud services. Unlike many regions facing grid constraints, Southern’s recent investments in nuclear and grid hardening make it one of the few utilities capable of guaranteeing the massive, steady power draws these facilities require.
