Midstream Leans Into AI Data Center Boom

by Kyle Richards of VettaFi, 9/28/25

Summary

  • The boom in artificial intelligence is driving unprecedented demand for energy to power new, large-scale data centers, creating a structural tailwind for domestic natural gas.
  • With the traditional power grid unable to keep pace, midstream companies are developing critical infrastructure, including new pipelines and dedicated power plants in select cases, to provide reliable energy for tech companies.
  • Midstream companies provided progress updates and new projects in 2Q25 earnings calls aimed at capturing what could become an 8.0 billion cubic feet per day (Bcf/d) incremental demand opportunity by 2030.

The rapid growth of artificial intelligence (AI) is fueling a massive buildout of power-intensive data centers, creating a significant new source of domestic energy demand. Because the traditional electric grid cannot meet the scale and speed of this new demand, tech companies are increasingly building their own dedicated power sources, with natural gas serving as a critical fuel. Midstream companies are capitalizing on this trend by developing new pipeline infrastructure and on-site power solutions, with 2Q25 earnings providing fresh updates. Today’s note provides an overview on data center spending and its implications for midstream and recaps recent updates from some of the key midstream beneficiaries.

Why data center growth is a game-changer for midstream

For the first time in two decades, U.S. electricity demand is on a sharp upward trajectory. For example, PJM Interconnection, which manages the grid for 13 states including Virginia, is forecasting peak summer electricity demand in 2035 that is 36% higher than what was anticipated for the summer of 2025. However, a struggling power grid is likely ill-suited for the speed and scale of this growth. One of the key drivers is the boom in AI, which requires massive, power-hungry data centers that need reliable, 24/7 electricity. This demand outpaces what intermittent renewables can supply alone or what the traditional grid can build quickly enough.

This has led tech giants to pursue “Bring-Your-Own-Power” solutions, where they develop dedicated, on-site power plants to ensure uninterrupted operations. Natural gas has emerged as a leading option for these facilities due to its reliability, scalability, and speed of deployment. Utilities are also turning to natural gas to support data centers. For example, Entergy (ETR) recently received approval to build over 2.2 GW (~0.39 Bcf/d) of new natural gas power plants to serve a $10 billion Meta data center in Louisiana.

This trend is being driven by an unprecedented capital spending cycle from major tech companies. Data from the five largest players — Amazon, Google, Microsoft, Meta, and Oracle — shows a projected $1.08 trillion in collective capital expenditures from 2024 through 2026 alone. After stepping up capital expenditures by 61% in 2025, these firms are expected to increase investment by another 23% in 2026, as seen in the chart below.

Expected global data center investment

Looking further ahead, analysts widely expect this spending cycle to continue growing, with McKinsey estimating that global data centers will require $6.7 trillion in capital expenditures by 2030 to keep pace with compute demand. Mega-projects like the OpenAI-led Stargate initiative, with its $500 billion U.S. investment plan through 2029, underscore the sheer scale of this capital deployment.

The potential impact on natural gas demand is significant. While estimates vary, an average of four analyst forecasts suggests AI data centers in the U.S. could require an incremental 8.0 billion cubic feet per day (Bcf/d) of natural gas by 2030. This directly benefits midstream companies, which will operate the pipeline infrastructure needed to deliver natural gas to data centers or the utilities supporting them. This data center boom represents a powerful domestic growth driver for natural gas that complements the well-established LNG export expansion (read more).