Data Centers Fueling Natural Gas Demand Boom

A report from BloombergNEF predicts that America's data centers will become the fifth-largest natural gas customer in the world, surpassing even the entire United States. This is due to the massive demand for electricity to power AI infrastructure, with data center natural gas demand expected to increase by 15 billion cubic feet per day over the next decade.

This forecast has more than doubled in just nine months and assumes that many proposed data centers won't get built. The shift towards natural gas is because it can fuel power plants that operate around the clock and adjust output as needed, providing 69% of the electricity required by new grid-connected data centers.

Investors can participate in this trend by getting positioned for higher natural gas prices or looking at the infrastructure required to deliver the fuel. Energy Transfer (ET) is a company that specializes in moving and storing energy commodities like natural gas, with long-term agreements covering 900 million cubic feet per day across three Oracle data centers.

The opportunity to earn returns from connecting customers to reliable supply makes ET's investment exposure different from a straight bet on the price of gas. Pipelines and companies making equipment that converts gas into electricity are also important parts of this buildout.