Williams Outshines Energy Transfer in AI Power Build-Out

Energy Transfer and Williams Companies are two of the largest midstream companies in the US. Both transport massive amounts of natural gas for powering data centers, but Williams is more of a 'pure play' on natural gas than Energy Transfer.

Energy Transfer operates over 140,000 miles of pipeline in 44 states, while Williams owns over 32,000 miles of pipeline in 24 states. Both companies are insulated from volatile commodity prices as they charge tolls to upstream and downstream companies for using their infrastructure.

The International Energy Agency (IEA) reports that natural gas accounts for more than 40% of the grid electricity consumed by US data centers. Since both Energy Transfer and Williams transport massive amounts of natural gas, they are benefiting from the growth of the power-hungry cloud infrastructure and AI markets.

However, one company has more exposure to the AI power build-out than the other. Williams generates all its adjusted EBITDA from its natural gas operations, making it a 'pure play' on the AI market. Energy Transfer's pipelines transport roughly 30% of the natural gas produced in the US but only generate about 40% of its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from its natural gas assets.

Williams owns Transco, the largest natural gas pipeline system in the US, which connects the Gulf Coast to the Atlantic Seaboard and Northeast markets. It transports about a third of all natural gas produced in the US, making it more of a 'pure play' on the AI market than Energy Transfer's diversified business.