Data Centers Ditch Coal for Natural Gas in AI Power Rush

Data centers are facing a power supply problem in the US as they struggle to meet growing demand for electricity from AI training clusters. Natural gas is emerging as a reliable and dispatchable source of energy, with the Department of Energy projecting that data centers will account for up to 12% of US electrical demand by 2028.

Three exchange-traded funds (ETFs) are giving investors exposure to different segments of the natural gas supply chain: First Trust Natural Gas ETF (FCG), Global X MLP & Energy Infrastructure ETF (MLPX), and Alerian MLP ETF (AMLP). FCG owns upstream producers, while MLPX holds midstream pipelines and processing plants. AMLP is a pure master limited partnership fund.

The Henry Hub spot price for natural gas has dropped to $2.73-$3.34 in July, but experts expect prices to rise as demand from data centers grows. The EIA forecasts the average Henry Hub price will be around $3.50/MMBtu in 2026 and $3.18/MMBtu in 2027.

The three ETFs have different investment strategies and risks. FCG tracks the natural gas curve closely, with investors experiencing both gains and losses depending on gas prices. MLPX offers a diversified portfolio of midstream operators with lower commodity price risk. AMLP focuses on providing high income through quarterly distributions.