By Amy Legate-Wolfe at The Motley Fool Canada
News flash: the next artificial intelligence (AI) winner may not look like tech. Data centres need chips, servers, software, and cooling. But above all, they need power. Lots of it. That puts a very Canadian group of stocks in a stronger position than many investors may realize: electricity producers and utilities.
Capital Power (TSX:CPX), ATCO (TSX:ACO.X), and TransAlta (TSX:TA) all offer different ways to invest in the same big idea. They may not look as exciting as chipmakers, but they sell the one thing the data centre boom can’t avoid.
CPX
Capital Power sits near the top of the list. The company owns and operates power generation assets across Canada and the United States, including natural gas, renewables, and flexible generation. Flexible generation plays an important role here because data centres need reliable power around the clock. Wind and solar can help, but large customers still need electricity when the sun isn’t shining and the wind slows.
In its recent materials, Capital Power pointed to opportunities to serve data centre demand at its sites across North America. That gives investors a clear catalyst beyond normal power-market growth. If large technology customers keep hunting for dependable electricity, Capital Power’s existing sites, development pipeline, and North American footprint could become more valuable.
The latest results also showed a business with momentum. Capital Power reported first-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) growth and continued contracting success. For investors, those contracts can help smooth out earnings and support the dividend of 3.8%. In short, Capital Power gives investors one of the more direct routes into data centre electricity demand.
ACO
ATCO offers a different angle. It owns utilities, energy infrastructure, modular structures, logistics, and other businesses. Through Canadian Utilities and its broader platform, ATCO has exposure to regulated infrastructure, electricity transmission, natural gas, and energy systems.
Data centres need wires, substations, grid upgrades, backup systems, and local infrastructure. ATCO’s investor materials have already pointed to data centres as one of the fastest-growing sources of electricity demand, with a need for firming capacity, gas-backed reliability, utility infrastructure, and hybrid energy systems.
That makes ATCO a sensible pick for investors who want the “picks and shovels” side of the boom. Its first-quarter 2026 adjusted earnings rose to $165 million, up from $160 million a year earlier. That’s not explosive growth, but ATCO doesn’t need explosive growth to work in a long-term portfolio. It needs steady demand, smart capital spending, and regulated returns. All while offering a 2.2% dividend yield to investors.
TA
TransAlta brings the more aggressive angle. The company owns and operates power generation assets across Canada, the United States, and Australia. It has gas, renewables, storage, and legacy power assets. It also has clear exposure to Alberta, a market that could benefit if data centre developers look for power-rich locations.
TransAlta recently agreed to buy two natural gas-fired peaking facilities in Colorado for about US$1 billion. The plants add 318 megawatts (MW) of capacity and come with long-term tolling agreements. That deal fits the current power market well. Peaking plants can help support reliability when demand spikes, and data centres add more pressure to already busy grids.
The company’s first-quarter numbers looked mixed, with adjusted EBITDA of $204 million, down from last year. But TransAlta still generated free cash flow and reaffirmed guidance. Investors buying TransAlta need more tolerance for volatility than they would with ATCO. But if electricity demand keeps climbing, TransAlta could benefit, while providing a solid 1.4% dividend yield to shareholders.
Bottom line
Together, these three stocks show why data centre investing doesn’t need to start and end with technology. Capital Power offers direct generation exposure. ATCO brings infrastructure and utility depth. TransAlta adds a more growth-oriented power-market play. All tallied, even a $7,000 investment brings in enough dividends for compound growth.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| ACO.X | $70.00 | 100 | $1.51 | $151.00 | Quarterly | $7,000.00 |
| CPX | $74.46 | 94 | $2.72 | $255.68 | Quarterly | $6,999.24 |
| TA | $19.17 | 365 | $0.28 | $102.20 | Quarterly | $6,997.05 |
AI may grab the headlines, but electricity keeps the system running. For investors, that could make power stocks one of the smartest ways to buy the data centre revolution before the market fully prices it in.
The post Why Data Centre Stocks Could Be the Smartest Buy on the TSX appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Capital Power. The Motley Fool has a disclosure policy.
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