3 stocks to watch: Examining why utilities is entering an era of transformation and the opportunities it brings

There’s genuine dynamism and opportunity in the utilities sector, driven by data centre demand, electrification and clean energy commitments. In fact, the very definition of ‘utilities’ is evolving rapidly, with some analysts now looking at Tesla as a utility stock due to its battery storage interests.

In our recent article ‘Beneath the Sector Surface: Utilities’, we picked out battery storage-turned-software player Stem Inc and solar technology firm Next Tracker as utilities stocks worth your attention. And we’ve got five more for you to look at.

In this article, we’ll explore:

• Why Google and Microsoft are influencing the future of energy
• Which potentially undervalued growth stocks are worth examining
• How to tap into the growth of AI without buying a single AI stock
• How natural disasters might influence your trading strategy

Ecopetrol S.A - income and growth?

The largest company in Colombia, Ecopetrol S.A is concerned with petrochemicals, gas distribution, hydrocarbon production, transportation, refining and logistics.

Analysts like it for two reasons; it has strong projected dividend yields which, as of May 2025, sit at 19.25%, and many view it as a potentially undervalued growth pick.

Why?

The general sentiment around Ecopetrol S.A is that the current value and the intrinsic value are misaligned. Share price performance has seen movement, with a 52-week high of $12.71 and low of $7.21. As of May 2025, it’s sitting around $8.50 a share on average.

What’s behind the potential undervaluation?

Like all companies concerned with gas and the broader energy supply sector, volatility makes it prone to rapid losses of value. And this has been happening historically. As far back as 2023, it shed 4.16% of its value in a single day.

The firm is well positioned globally, but strongest in the Americas. It has drilling and exploration operations in the Gulf of Mexico, Brazil and Mexico and through its subsidiaries it’s involved in power transmission in much of South America. It even has an interest in the telecommunications sector too.

One note of caution is its high levels of indebtedness. In April 2025, Santander lent Ecopetrol S.A $500 million USD. You can interpret this in two ways; be concerned about the company’s cash flow, or take it as an external vote of confidence in its future value.

Constellation Energy - backed by big tech

Nuclear energy has an historic public relations problem. Environmental campaigners still lean on the Chernobyl disaster and the global nuclear disarmament movement as reasons to shun what is a reliable source of carbon-free energy. But public perceptions could be slowly turning in a new direction.

Big tech is making major commitments to nuclear as the answer to increasing energy demands. In May 2025, Google announced a strategic investment into Elementl Power to accelerate the development of three new nuclear sites. And last year Microsoft entered a purchase agreement to buy nuclear energy from Constellation to power its data centres.

The search giant is having an influence on the future of energy.

And this is why we think Constellation could be a great buy-and-hold growth pick. It is already the largest producer of carbon-free energy in the United States.

It’s not necessarily undervalued, but has immense growth potential, especially if more big tech firms direct their energy demands toward nuclear.

In the last three years, Constellation Energy stock has outperformed Nvidia. And with demand for nuclear accelerating, there’s potential for that performance to continue.

Edison International - a cautionary tale

Among the fervent optimism for utilities lies a tale of caution. Utilities stocks are at the mercy of two extremely powerful forces; nature and the regulators. While regulatory whims and overreach can be costed in to a point, you never know when a natural disaster will strike.

This is why Californian utility holding company Edison International is an interesting stock to watch. Analysts broadly agree that it remains undervalued after its share price plunged 35% in January in the midst of the California wild fires. It’s a potential growth pick due to its unfair value, but serves as a useful reminder that utilities stocks, while stable on the whole, can suffer extreme volatility at short notice.

Do you know how sophisticated traders analyse price movement to take tax efficient positions, without buying the assets? Check out our guide to spread betting.

The bottom line

Clean energy and storage are among the most dynamic industries you can invest in. Legacy utilities are among the most defensive, with good dividends. Opportunities abound for all risk appetites and trading strategies in the utilities sector. Sophisticated traders will be looking at both ends of the spectrum for opportunities.

Sources

• https://www.prnewswire.com/news-releases/ecopetrol-sa-obtains-authorization-to-execute-a-loan-agreement-with-an-international-bank-for-five-hundred-million-dollars-302440426.html
• https://finance.yahoo.com/news/ecopetrol-sa-ec-too-good-155316140.html
• https://www.prnewswire.com/news-releases/ecopetrol-sa-obtains-authorization-to-execute-a-loan-agreement-with-an-international-bank-for-five-hundred-million-dollars-302440426.html
• https://www.investor.nexteraenergy.com/~/media/Files/N/NEE-IR/reports-and-fillings/quarterly-earnings/2025/Q1%202025/NEEQ12025Exhibit%2099.pdf
• https://blog.google/feed/google-and-elementl-nuclear-energy-site-development/
• https://www.microsoft.com/en-us/microsoft-cloud/blog/2024/09/20/accelerating-the-addition-of-carbon-free-energy-an-update-on-progress/
• https://www.nasdaq.com/articles/why-constellation-energy-top-nuclear-and-ai-stock-buy-2025
• https://www.reuters.com/business/energy/california-wildfire-fund-may-shield-edison-balance-sheet-fire-claims-company-2025-02-27/
• https://www.blackrock.com/lu/individual/products/340744/ishares-msci-world-utilities-sector-advanced-ucits-etf