Goldman Sachs Sees Value in Midstream Stocks Amid Data Center Demand Surge

Goldman Sachs has identified emerging value in natural gas midstream stocks following a recent pullback. The investment bank significantly increased its forecasts for natural gas-fired power demand, driven by data centers, from 7-8 billion cubic feet per day to 10-11 bcf/d between 2025 and 2030. This revision follows Goldman Sachs' utilities and power research team's update last month, which boosted total data center power forecasts for 2030 by approximately 30 percent to 108 gigawatts from 83 GW previously.

The midstream pipeline group has declined 12 percent from its mid-May peaks, creating an attractive entry point for investors. Goldman Sachs highlights three companies that could benefit from the increased demand: Williams (WMB), Kinder Morgan (KMI), and Kodiak Gas (KGS). The firm sees continued execution on new natural gas pipeline project announcements as necessary to reverse recent softness and validate growth expectations.

Williams reported second-quarter revenue of $3.05 billion, exceeding analyst expectations. Meanwhile, Kinder Morgan announced second-quarter results that surpassed Wall Street estimates for both profit and revenue, with the company also raising its financial guidance for the full year. Kodiak Gas Services' second-quarter revenue of $391.1 million exceeded analyst forecasts.