Investors Boost American Electric Power on AI Growth
American Electric Power Inc. (NASDAQ: AEP) stock is up approximately 5% despite the company posting mixed earnings on Oct. 29. This extends the stock’s strong performance in 2025, when it was up approximately 31%.
AEP reported revenue of $6.01 billion, up 7.9% from estimates of $5.57 billion. However, the company missed on the bottom line. Earnings per share (EPS) of $1.80 were a fraction lower than expectations of $1.81. However, through the first three quarters of 2025, revenue and earnings are both up on a year-over-year (YOY) basis.
Utilities stocks are cyclical plays. A long-term story plays out as the need for more energy coincides with the need to update existing infrastructure. It’s a perfect storm for a company like American Electric Power, which owns and operates the largest transmission network in the United States.
Many investors have been piling into these stocks in 2025 as part of a long-term artificial intelligence (AI) trade. The post-earnings surge in AEP stock shows that investors are willing to play the long game as AEP’s key role in the expansion of AI infrastructure plays out.
The Next Generation of AI Infrastructure
The concept of AI infrastructure is becoming larger than hardware or software solutions. Companies like NVIDIA Corp. (NASDAQ: NVDA) and hyperscalers like Microsoft Corp. (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) will continue to play crucial roles in this new economy. However, the power demands stemming from these data centers make a compelling long-term case for utilities stocks such as AEP.
The company raised its forecast for long-term operating earnings growth rate to 7% to 9% over the next five years. To support this commitment, AEP announced a $72 billion capital expenditures (CapEx) plan based on an anticipated 10% annual growth in the company’s rate base.
The most aggressive growth will take place between 2028 and 2030 as these projects come online. However, the company still guided for 2026 earnings between $6.15 and $6.45 per share. That’s an increase of approximately 8% from the company’s midpoint guidance.
Modest Rate Increases Will Be a Win-Win
The unwelcome side of the data center buildout is its impact on residential electric bills. There's no official data yet, but preliminary data from the U.S. Energy Information Administration (EIA) indicates a 6% increase in U.S. residential electricity prices in 2025 compared to August 2024.
The need for data centers is one of the driving forces behind this increase. In fact, the EIA also projects that U.S. data center electricity has nearly doubled between 2022 and will continue to grow in 2026 and beyond.
American Electric Power addressed that issue by outlining its efforts to mitigate the impact of this rising demand on its customers’ bills. AEP says it will limit residential rate increases to 3% and 5% annually across its system.
AEP Remains a Buy-the-Dip Candidate After Earnings
Clearly, investors liked what they heard from AEP. The stock gapped up strongly on a volume of 4.65 million shares, 138% of its average.
This has pushed the stock above October resistance levels between $117 and $119 and signals strong bullish momentum that may attract some follow-through buying in the next day or two. While not a significant factor, it’s important to note that the combination of today’s trading volume and 6.8 days needed to cover the short positions could support the bull case if short sellers decide to unwind their positions.
However, the MACD indicator shows a recent bearish crossover, suggesting that investors may need more than the earnings report to maintain bullish momentum. Support for that comes from the Relative Strength Indicator (RSI), which is around 65 as of this writing (not shown).
If there's a pullback, the 50-day simple moving average (SMA) should provide broad support, making it an ideal buying opportunity.
