Energy Transfer vs. Kinder Morgan: Which Natural Gas Pipeline Stock Is the Better Buy for the AI Power Boom?
2026-10-24 18:15
•Reuben Gregg Brewer •The Motley Fool
••••••• •• Axe Cap view
Energy Transfer or Kinder Morgan: A Play on AI’s Energy Surge
AI’s rising electricity demand will boost natural gas pipelines, but which stock offers better value?
The AI boom promises a big jump in electricity demand, and natural gas pipelines will benefit as they feed power plants responding to that growth. In the US, Kinder Morgan leans heavily on natural gas, tying two-thirds of its business to that commodity, making it a purer play on AI-driven power expansion. Energy Transfer's exposure is lower at 35%, but its business diversity cushions commodity volatility. Importantly, ET offers a juicy 6.7% dividend yield, appealing to income-seeking investors, while KMI yields just half that. South African investors should watch USD/ZAR here: a weaker rand could amplify import costs for local energy infrastructure and influence valuation multiples for SA counterparts like Sasol. Sasol’s gas exposure is indirect but still meaningful as local gas developments lag US pipeline expansion. If the AI-powered rise in electricity demand stutters, or natural gas loses its competitive edge sooner due to renewables, both names could feel the pinch. this is just our opinion and not financial advice
For income, Energy Transfer looks attractive with its higher dividend and lower commodity risk; for growth focused on AI-driven gas demand, Kinder Morgan is worth watching but expect lower yields. Keep an eye on the rand as currency swings can impact local inflation and sector multiples.
- Energy Transfer (ET)
- Kinder Morgan (KMI)
- USD/ZAR
- Sasol
- AI electricity demand growth disappoints
- Natural gas displaced faster by renewables
6/10
Energy Transfer and Kinder Morgan are both positioned to benefit from AI's massive electricity demand growth, which is expected to increase 4x faster than other sectors through 2030. Kinder Morgan has greater natural gas exposure (67% vs 35%) making it more leveraged to AI power generation, but Energy Transfer offers a significantly higher dividend yield (6.7% vs 3.4%), making it more attractive for income-focused investors despite less direct AI exposure.
Our take is based on reporting first published by The Motley Fool.
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