Oil prices surge to two-week winning streak as Iran supply fears grip markets
After blowing up Europe’s Nord Stream gas pipelines (NS1 and NS2), the US is just starting to reap long-term gains. According to Goldman Sachs’ December report, the global LNG (liquefied natural gas) supply is set to increase 50% by 2030, with the US as the primary growth driver.
Consequently, the bank’s analysts consider 2026 to be the last year of the oil supply wave and the start of the LNG supply wave. When it comes to oil, the International Energy Agency (IEA) projects that supply will exceed demand by 3.85 million bpd (barrels per day), or around 4% of global oil demand.
As AI data centers continue to be deployed, more competition is expected for on-site generation locations, given data centers’ sensitivity to interruptions and grid instability, according toBloom Energy’s (NYSE:BE) report from June. By 2030, around 38% of facilities are forecast to rely on on-site generation as the primary source. In contrast, 100% on-site-powered facilities accounted for only 1% in 2024, and this is now expected to increase 27-fold by 2030.
Lastly, IEA forecasts global renewable energy capacity to increase by 4,600 GW by 2030, with most of that (80%) coming from solar. The IEA cut the previous forecast by 248 GW, owing to a greater focus on more efficient, energy-dense nuclear power, with China as the global leader.
With these energy trends in mind, here are three stocks investors should consider for optimal exposure.
1. Eaton Corporation – 25% Upside Potential
Investing in the suppliers rather than the producers is often overlooked, but is the safest way to play a boom. Ohio-based Eaton Corporation (NYSE:ETN) is supplying critical components across industrial, aerospace, mobility, and electrical sectors. These products range from switchgear and UPS systems to motors, inverters and lighting controls.
Suffice to say, energy-dense data centers, typically needing 10-20x higher power density than traditional cloud servers, are poised to drive this demand. And Eaton is the beneficiary, sharing an effective duopoly in this space with Schneider Electric.
In the latest Q3 earnings report, Eaton achieved record segment margins of 25%, up by 70bps from the year-ago quarter. In this period, the company brought in 70% more data center orders from its Electrical Sector and Electrical Americas divisions, growing its record quarterly revenue by 40% to $7 billion.
After acquiring Boyd Thermal in early November, Eaton plans to capitalize on liquid cooling solutions, making the company even more indispensable for society’s new algorithmic layer. For all of these reasons, there is a significant upside to ETN exposure at this point.
Year-to-date, ETN stock is up 1.57%, currently priced at $318.51 per share. This price range remains below the Wall Street Journal’s lower forecast of $336.10 per share and significantly below the average ETN price target of $408.07 per share.
2. Devon Energy – 26% Upside Potential
Focusing on three major basins, Delaware, Eagle Ford, and Anadarko, Devon Energy (NYSE:DVN) generates revenue from extracting oil, natural gas, and natural gas liquids (NGLs). The company fully onboarded the AI train, as evidenced by its proprietary LLM, ChatDVN, which analyzes operational data, detects anomalies, and boosts the overall efficiency of its extraction operations.
This is not surprising, however, given that AI algorithms were already on par with radiologists in reading chest X-rays by late 2018. Likely, the pattern-discerning power of AI has significantly contributed to an increase of 60% in Devon’s utilization rate of simulfracs (simultaneous hydraulic fracturing) this year.
In Q3 earnings, Devon reached the top-end of its production guidance, at 390,000 bpd, generating $1.7 billion in operating cash and $820 million in free cash flow. After leasing 60 locations in the Delaware Basin, Devon is expected to bring online ~90 gross operated wells in Q4, with expected output up to 844,000 BoE (Barrels of Oil Equivalent) per day, while oil production is expected to be up to 388,000 bpd.
Simultaneously, Devon’s optimization efforts aim to cut $100 million in 2026 relative to 2025. To that end, the company already achieved just over 60% of its $1 billion optimization target. Year-to-date, DVN stock is up nearly 1%, currently priced at $36.36 per share. The Wall Street Journal’s consensus aggregates the bottom DVN outlook at $33 and the average price target at $45.80 per share.
3. BWX Technologies – 27% Upside Potential
Since our coverage of BWX Technologies (NYSE:BWXT) stock in late June, it gained 23% value. This upside is likely to continue due to the company’s unique position. Namely, the Idaho-based, specialized engineering firm designs, manufactures, and services critical nuclear components. These are not only important for the US Navy, which underpins the USD as the world’s reserve currency, but also for the wider nuclear sector in the age of AI data centers.
In Q3, the Government Operations division increased its year-over-year revenue by 10% to $616.7 million. Commercial Operations completely overshadowed this growth, rising 122% to $251 million, generating total revenue of $866.3 million, up 29% from the year-ago quarter.
BWX’s operating cash flow increased by 339% to $143.2 million, with a relatively low capex increase of 20% to $48.3 million. Presently priced at $172.84 per share, BWXT stock was up 58% last year. Yet, even this price level is below WSJ’s bottom outlook of $184, while the average BWXT price target is $223.20 per share.
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