Is WEC Energy Stock Undervalued Amid AI Power Demand?

WEC Energy US92939U1060

Despite a recent decline in its share price, a fresh valuation assessment points to a significant discount for WEC Energy Group. Concurrently, the utility is strategically aligning itself to benefit from the burgeoning power requirements of artificial intelligence. This raises a question for investors: does the current pullback represent a buying opportunity?

Demonstrating active capital management in a period of elevated interest rates, Wisconsin Electric Power Company, a subsidiary of WEC Energy, filed a prospectus supplement on December 2 for a new offering of unsecured notes. Proceeds from this debt issuance are earmarked for repaying short-term obligations and funding general corporate purposes.

The market's reaction has been cautious. Shares closed Tuesday's session at $108.09, down 1.14%, trading near the lower end of their recent range. Since reaching highs around $118.19 in October, the stock has shed approximately 8.5% of its value.

A Disconnect Between Price and Intrinsic Value?

The recent downward trend may be overdone, according to fundamental analysis. A valuation estimate published on December 3 calculates a fair value of roughly $122.50 per share. Compared to the current trading price, this suggests the equity could be undervalued by about 11.8%.

This potential discrepancy is viewed alongside a substantial $28 billion, five-year capital investment plan. These expenditures, focused on grid modernization and renewable energy projects, are designed to support predictable annual earnings growth in the 6-9% range.

Institutional investor activity presents a mixed picture. While Level Four Advisory Services decreased its holding by 14.2% in the second quarter of 2025, Trustmark Bank Trust Department established a new position, acquiring 2,471 shares.

The AI Power Thesis: A Regulated Utility Advantage

WEC Energy is increasingly cited as a potential beneficiary of the tech industry's escalating electricity needs. As a regulated utility operating in Wisconsin—a state hosting significant data center operations for companies like Microsoft—the company is well-positioned within the AI power narrative.

Unlike some independent power producers whose valuations have soared, regulated utilities like WEC trade at more normalized multiples, with a price-to-earnings ratio around 20.8. This could position the firm as a comparatively stable way to gain exposure to the theme of rising power demand from artificial intelligence.

Investors also received a tangible return this week. The quarterly dividend of $0.8925 per share was paid on December 1, translating to an annualized yield of approximately 3.2%.