North American utilities could see a capex “super cycle” driven by demand from data centers, according to credit ratings agency Morningstar DBRS.

Growth expenditures by investor-owned utilities are expected to surpass $1.1 trillion by 2029 as increases in the size, capacity, and quantity of data centers in North America drives electricity demand.

In the US, investor-owned utilities have already invested more than $1.3 trillion over the past decade.

"We anticipate that regulated utilities with supportive regulatory commissions, solid credit ratings, and access to capital markets will deploy the needed capex to take advantage of the data center boom," said Bukola Folashakin, assistant vice president, Corporate Ratings at Morningstar DBRS.

"We expect this capex investment in turn to make such utility locations attractive for more data center construction, potentially creating a cycle of increased revenue for as long as data centers remain economically viable."

Morningstar said data center demand across the US, specifically, is being led by the “rapid evolution and adoption of AI as well as other forms of technology.”

This will likely lead to a “super cycle” of capex over the next decade, according to the commentary.

Earlier this year, Deloitte reported that AI-driven data center expansion will be responsible for around 44GW of additional power demand by 2030 in the US alone. The US will lead electricity consumption from data centers, with demand growth centered in data center hubs.

Morningstar said that utilities in these areas are “ahead of others” in planning surging demand.

For example, in Virginia’s data center alley, where demand for new data centers is spreading throughout the state, Dominion Energy, the state’s primary energy utility, has been expanding its energy grid.

Dominion’s total data center power capacity under contract has almost doubled in just half a year. In February, Dominion unveiled an updated five-year capex plan, projecting spending of $50.1 billion from 2025 to 2029, a revision from its previous estimate of $43.2 billion.

According to Morningstar, Dominion expects its peak electricity load to climb by 60 percent to 41.5GW by 2034.

“In the long term, investment capital in the trillions of dollars is expected to persist in the next decade and beyond. Regulatory support to ensure that prudently incurred capex is recovered in a timely fashion through appropriate tariffs and riders is key to maintaining credit profiles,” Morningstar said.

“The challenges posed by the rapid buildout of data centers are overlaid on existing concerns for most utilities, including decarbonization and guaranteeing the reliability of grid infrastructure while increasing the contribution of renewable power,” the credit ratings agency added.

“The projected surge in demand provides opportunities for utilities that must be counterbalanced with structural changes and regulatory support for utilities and rate payers.”