RBC Capital Markets has initiated coverage of NiSource with an outperform rating and a $52 price target, arguing that the utility's Indiana electric subsidiary, NIPSCO, could secure more than 1 gigawatt of new data center demand—and that investors are not yet pricing in that potential.
For everyday investors, this is a story about how a regulated utility can grow earnings in an era of surging electricity demand from artificial intelligence and cloud computing. But as RBC points out, the path from a pipeline of potential projects to actual profit growth is not straightforward.
What RBC Sees in NiSource
RBC, a global investment bank, believes NIPSCO is tracking multiple data center sites in northern Indiana. If those projects are finalized, they could add more than 1 gigawatt of peak power demand—enough to power hundreds of thousands of homes. The bank estimates that such wins could help NiSource achieve roughly 10% earnings-per-share growth through 2030, compared with about 8% for similar utilities.
But for utilities, demand growth alone does not automatically translate into higher profits. Regulated utilities typically earn money by building infrastructure—power plants, transmission lines, substations—and earning a regulated return on that invested capital. So the key question is whether NIPSCO can get regulatory approval to build the necessary infrastructure to serve those data centers.
The GenCo Structure Advantage
RBC highlights NiSource's GenCo structure—a separate generation company that can keep some large-load spending outside the regulated rate base. This matters because when a utility spends money on new power plants or grid upgrades, it typically must seek approval from state regulators to recover those costs through customer rates. That process can be contentious, especially when customers are already sensitive to higher bills.
In Indiana, affordability is a flashpoint. NIPSCO's June 2025 electric rate-case approval included a $1.4 billion customer-savings commitment, signaling that the utility is mindful of bill impacts. RBC argues that the GenCo structure could allow NiSource to add capacity for data centers without triggering the same level of rate-hike fights, potentially speeding up project timelines and reducing regulatory risk.
This is a similar dynamic to what other utilities are exploring as they seek to meet data center demand. For example, Aecon Consortium Wins C$4B Alberta Gas Plant to Power Data Centers shows how large-scale energy infrastructure is being built specifically to serve the data center boom.
What It Means for Investors
RBC's $52 price target hinges on whether NIPSCO's 1-plus-gigawatt pipeline becomes approved, paid-for buildout. If those projects move from pipeline to reality without affordability backlash or regulatory delays, NiSource could merit a larger valuation premium than the 7%-8% premium it currently trades at on RBC's 2030 estimates.
For context, data center demand is a major theme across the utility sector. As AI and cloud computing drive electricity consumption higher, utilities with exposure to regions where data centers are clustering—like northern Indiana—are attracting investor attention. However, the market is learning that not all data center pipelines are created equal. The ability to secure regulatory approval and manage customer bill impacts is critical.
RBC's analysis suggests NiSource may have a structural advantage in that regard. But investors should watch for concrete announcements: signed contracts, regulatory filings, and construction timelines. Until then, the upside remains potential rather than realized.
Other companies are also positioning for this trend. ITG Jumps 12.5% in Nasdaq Debut After Pricing IPO Below Range, Signaling AI Infrastructure Demand highlights how capital markets are responding to the broader infrastructure buildout. And BDx Data Centers Explores IPO to Fund AI-Driven Asia Expansion shows the global nature of this demand.
The Bottom Line
NiSource's story is not just about selling more electricity to data centers. It is about whether the company can turn that demand into approved capital spending that generates a reliable return for shareholders. RBC believes the GenCo structure and recent rate-case outcomes suggest it can. If the bank is right, NiSource could deliver above-average earnings growth and a higher valuation multiple. If not, the stock may remain stuck in the middle of the utility pack.
