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• DT Midstream is ideally positioned to supply natural gas for the Midwest's booming AI data centers.
• Despite a high valuation, the company's $2.3 billion project backlog could keep rising.
• Risks include a slowdown in capital expenditures after 2026, local opposition to new projects, and a pull-back in AI-related stocks.

By Laura Sanicola

DT Midstream may be the best house on the AI block.

DT is a natural-gas pipeline operator in a prime location: Its network sits right beneath the Midwest’s data-center boom. Companies like Open AI, Amazon, and Meta Platforms are developing data centers in states like Wisconsin, Indiana, and Michigan. They will need far more power from gas-fired plants. DT owns the pipes to supply it.

This isn’t a growth story the market has missed. DT’s stock is up 18% this year after an 81% run in 2024. Shares trade at 24 times earnings, on the high side for a pipeline company. The stock is a bank shot on AI: signs of a pullback in data center spending would pressure its shares and multiple. 

More gains may be ahead, though.

DT is expanding its pipeline network with a $2.3 billion backlog of projects through 2030. Only 70% of those projects are finalized, creating potential for gains if the rest comes through. Some analysts expect the backlog to top $3 billion when the company reports fourth quarter earnings in February. That could keep the stock aloft.

DT is a relatively new pipeline stock, spun out of Midwest utility DTE Energy in 2021. The company significantly increased its network in 2024 with a $1.2 billion purchase of ONEOK's Midwest pipeline assets, including systems in Wisconsin, Illinois, Indiana, and Michigan.

Today, DT operates more than 2,000 miles of pipeline in the Midwest and Northeast. DT also owns a “gathering system” of small pipes that transport gas directly from the Haynesville shale basin, where gas is processed and moved to Gulf terminals for LNG exports.

The data center buildout is DT’s prime growth driver.

Amazon says it plans to spend $15 billion on two AI-focused data-center campuses in Indiana, supported by a bespoke power agreement with the state’s largest gas supplier, NIPSCO. Utilities will need new gas-fired generation and DT’s system should benefit.

In Wisconsin, Meta and Microsoft are building large data-center campuses. DT’s Guardian pipeline serves that area, a big reason the company is expanding that pipeline’s capacity by 40%.

Other projects include an OpenAI/Oracle campus in Michigan, a massive 250-acre development expected to begin construction next year. The project will require several hundred megawatts of new power supplied by DTE, which gets gas from Midstream’s Vector pipeline.

CMS Energy, another utility that DT serves, has a contract for data center power and says it’s in late-stage negotiations for three more, representing 2 GW of additional load.

Farther south, DT increased the capacity of its Haynesville-to-Gulf pipeline ahead of schedule. The company said recently that growing LNG announcements in Louisiana are creating opportunities for expansion.

“They’re sitting at the center of one big natural-gas megatrend plus a power-center megatrend,” says Alex Meier, a portfolio manager at Eagle Capital, which owns the stock.

Jefferies analyst Julien Dumoulin-Smith is also a fan. The densest prospects for large gas turbine projects are in the Midwest where DT has “a clear line of sight on expanding its infrastructure,” he wrote in a recent initiation note.

Dumoulin-Smith sees the stock at $125 over the next year, up from recent prices around $119. That would imply there isn’t much juice left in the stock, reflecting a full valuation that’s already pricing in the AI growth story.

Yet Dumoulin-Smith and other bulls argue DT will keep growing as the Midwest power story stays aloft, fueled by more projects being mapped by utilities in 2030 and beyond.

Citi and Jefferies analysts see its backlog rising to $3 billion and above over the next several years. A larger backlog would also instill confidence that DT is capturing real, contracted volumes, supporting the company’s 5%-7% long-term Ebitda growth target.

DT’s finances look solid near-term. Its balance sheet holds $3.5 billion of net debt, including $900 million from financing the ONEOK deal. That looks manageable. DT is expected to generate $500 million in free cash flow next year, leaving enough cash for debt payments, dividends, and other expenses.

Beyond 2026, things look dicier. DT’s capital expenditures are expected to rise from $470 million next year to $621 million in 2027 and $733 million in 2028, according to consensus forecasts. That will squeeze its free cash flow, expected to decline by roughly 20% a year.

Perhaps the biggest risk is the AI trade losing steam, and it’s not just a tech story. Consumer and political resistance is growing to data centers hogging power and pushing up electricity prices.

The OpenAI/Oracle campus in Michigan is facing organized pushback from residents, for instance. Michigan’s attorney general is scrutinizing the approval process.

DT has some protection against the AI backlash. A few of the utilities it’s supplying have made deals with data centers to avoid passing on higher costs and gas prices to consumers. But not every data-center announcement in its orbit is a sure thing.

An LNG glut is another risk. Several U.S. developers are advancing terminals without fully contracted “offtake” agreements. That could leave capacity underutilized. Slower Haynesville growth would weigh on DT’s gas-gathering revenues and introduce re-contracting risk on some pipelines.

The next big event for DT is its February earnings report. The company is expected to provide its once-a-year update on its project backlog. If it goes well, the stock is likely to move up another notch. Signs of a slowdown would take it in the opposite direction.

For now, investors in DT are paying up for the oldest adage in real estate: location, location, location.

WaterBridge Begins to Simmer ↑ Two months after its splashy IPO, WaterBridge is winning converts on Wall Street. Stifel recently initiated coverage with a "Buy" rating and $30 target, estimating 36% gains from prices trading around $22.

Waterbridge operates a massive plumbing network in the Permian Basin to dispose of the roughly four barrels of salty, contaminated water that surface for every barrel of oil every day. The company charges a fixed fee to pipe away the waste and bury it underground.

It's a good business with few competitors, and investors know it; the stock trades at 72 times estimated 2026 earnings of 32 cents a share.

Stifel argues the stock is worth $30 based partly on a rising water-to-oil ratio in the Permian and the company's strategic access to underground storage via partner LandBridge. The bank values the stock at 9.5 times estimated 2027 Ebitda, betting that as drillers target deeper rock, they will require more disposal volume per well.

In its first quarterly report earlier this month, WaterBridge said it moved 2.5 million barrels daily to generate $206 million in revenue and $106 million in adjusted profit. To shore up its balance sheet, the company issued a $1.4 billion bond.

Despite the bullish coverage and solid volume growth, shares are trading only modestly above the $20 offering price as investors weigh the long-term growth story against the risks of being heavily concentrated in a single energy basin.

The company would suffer if U.S. production slowed, as was the case with Atlas Energy, the supplier of sand for fracking materials whose shares have slumped 40% since OPEC began rapidly unwinding production cuts in April. 

Stocks impacted: WaterBridge LLC (WBI), LandBridge (LB)

Nuclear Stock Meltdown ↓ The AI bubble may not have deflated for Nvidia, but nuclear stocks are showing weakness.

Oklo ended November down 36%. NuScale Power has fallen 58%, hit particularly hard as major holder Fluor sold shares to fund its own buybacks, responding to activist pressure to monetize its stake.

Both companies are trying to make small modular reactors, which are smaller nuclear plants meant to deliver steady, carbon-free power to data centers, industrial sites, government facilities, and remote communities.

NuScale’s water-cooled design resembles a scaled-down version of today's large reactors. The business depends heavily on utility customers, long development timelines, and traditional Nuclear Regulatory Commission (NRC) licensing.

Oklo is pitching a smaller, fast-fission design. The company plans to build, own, and operate the reactor, selling power directly to customers.

Oklo could generate quicker profits from a smaller unit which also may be used to manufacture high-value medical and industrial isotopes. The reactor will likely be cheaper and quicker to build, with an estimated cost of $75-$100 million and a mid-2026 start date with an expedited regulatory timeline, Citi estimates.

Despite the pullback, Oklo stock is still up more than 300% this year to $87. Citi thinks it has more juice, raising its target to $95 from $68 last week, seeing $150 million in Ebitda by 2032.

That's still far off, of course. But Oklo has roughly $1.2 billion in cash after raising equity this year. That should ease near-term fuinding needs and allow analysts to model additional capital raises at the current share price instead of a discount, according to Citi analyst Vikram Bagri.

One big holdup for both companies is a shortage of nuclear fuel known as HALEU. The only country that produces it at commercial scale is Russia, which is only an option through 2028. Oklo has secured 7% of the fuel its Aurora reactor would need to operate at capacity from Idaho National Labs. NuScale hasn't said how much fuel it has secured but is expected to tap into a DOE program to supply it. 

Stocks and ETFs impacted: Oklo (OKLO), Nuscale (SMR), Global X Uranium ETF (URA)

Refiners Get a Counter-Seasonal Boost ↑ The fourth quarter usually isn't the strongest for refiners, but this one is shaping up well.

Tudor Pickering Holt says Marathon, Valero, Phillips 66, and HF Sinclair are all seeing stronger November margins, helped by firmer gasoline and diesel pricing rather than any big moves in crude.

Those gains mean the quarter is running well ahead of typical seasonal patterns. Refiners would benefit further if heavy crude gets cheaper, biofuel credit costs fall, and the WTI crude market strengthens, deepening the discount they get for heavy sour crude inputs.

Geopolitical issues complicate the picture.

Venezuela could help or hurt U.S. refiners. The Trump administration is sabre-rattling about regime change in the country. If sanctions tighten or the U.S. invades, Venezuelan oil may be curtailed, constraining supplies for Gulf refiners. Conversely, in a peaceful outcome, Venezuela could redirect oil from China to the U.S., easing a shortage of heavy oil on the Gulf. 

The Russia-Ukraine war is another complication. A peace deal could help Russia sell far more crude and diesel on global markets. Recent political maneuvering doesn't point in that direction, though, keeping supplies of refined products tighter and pumping up margins for U.S. refiners.  

Stocks impacted: Marathon Petroleum (MPC), Valero Energy (VLO), Phillips 66 (PSX), HF Sinclair (DINO)

Fluence Energy Has High Hopes for the Fiscal Year. Analysts Are Torn Over the Stock.

Oil Could Fall to the $30s—Unless Someone Turns Off the Taps

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