Artificial intelligence (AI)-driven electricity demand is fueling record natural resources M&A in North America, with dealmakers expecting continued acquisition activity across utilities, natural gas, and energy infrastructure.

Utility and power transactions accounted for nearly 70% of the record USD 330.5bn in natural resources deal value logged in 1H26, according to Mergermarket data. Dominion Energy’s pending USD 118.8bn acquisition of NextEra Energy – among the five largest deals announced globally in 1H26 – accounted for more than half of the sector’s record USD 224.9bn deal value.

The sector’s largest transactions highlighted the link between rising power demand and M&A activity. Half of the 10 largest deals announced in 1H26 involved utility and power companies, while three targeted natural gas producers positioned to benefit from growing electricity demand.

Japan’s Mitsubishi, for example, cited rising electricity demand from AI and data centers among the factors behind its USD 7.5bn acquisition of shale gas producer Aethon Energy, its largest acquisition to date.

Even excluding Dominion’s pending acquisition of NextEra, utility and power M&A would have reached USD 106bn in 1H26, its second-highest half-year total of the past nine years.

“The need for power for data center projects is one of the primary concerns – if not the primary concern – for data center developers across the US and one that will result in continued M&A activity,” said Justin T. Stolte, global chair of Latham & Watkins’ energy & infrastructure group. “This is the early innings of a long-term, multi-year story [about] obtaining significant amounts of power.”

Strategic buyers, which accounted for just over half of utility and power transactions in 1H26, are expected to continue driving deal activity as companies seek greater scale to support investment needed to meet AI-driven electricity demand growth. North American utilities are expected to invest about USD 1.4tn between 2026 and 2030, roughly 50% more than during the previous five-year period, according to BCG.

NextEra said its merger with Dominion would provide a cost-effective way to meet surging electricity demand, including more than 130 gigawatts of large-load opportunities in its development pipeline.

This drive for scale has prompted large publicly listed companies to acquire private equity-backed portfolios, including Talen Energy’s USD 3.5bn acquisition of three Energy Capital Partners-owned power plants and Vistra’s pending USD 4.7bn acquisition of Quantum Energy Partners-backed Cogentrix Energy.

“This trend underscores the competitive advantage of public currency and balance sheets in financing the next wave of grid reliability and data center support,” Houlihan Lokey said in its Power, Utilities, and Renewables Market Snapshot for 2Q26.

Heightened competition for thermal generation assets has pushed average valuations for gas-fired power plants above USD 1,100 per kilowatt, more than double the 2020-2024 average, according to Houlihan Lokey. The trend is also reflected in average deal values in the utilities and power sector, which increased from USD 548.2m in 2H25 to USD 1.1bn in 1H26, according to Mergermarket data.

Valuations could rise further if unconventional buyers enter the market for power assets, such as hyperscalers. In March, Alphabet closed its USD 4.8bn acquisition of independent power producer Intersect.

“There has been some speculation that we could see some of the hyperscalers obtain power by acquiring the underlying assets, including through acquisitions of utilities or other large power generation companies,” said Stolte. “We’ll see if that’s the case.”

Oil and gas buyers chase longevity

Although overshadowed by utility and power, oil and gas recorded its highest first-half deal volume since 1H24, when the consolidation wave sparked by ExxonMobil’s USD 68.3bn acquisition of Pioneer Natural Resources was nearing its conclusion.

While reserve replacement remains the dominant rationale for many oil and gas deals, the sector is also beginning to benefit from the AI-driven power boom. Growing electricity demand from data centers is expected to support natural gas consumption, boosting strategic interest in gas-focused assets.

Strategic buyers drove activity as companies sought to replenish reserves and extend the life of their portfolios. Permian producers are increasingly reluctant to sell inventory in this current environment, said J.P. Hanson, global head of Houlihan Lokey’s oil and gas group and co-head of its energy group.

Sponsor-led activity – including buyouts, add-ons, and exits – is also expected to remain strong in 2H26 after deal volume reached a five-year high of 50 transactions in 1H26.

More exits are likely as sale processes launched after crude prices surged during the Iran conflict approach completion, said Stephen Trauber, chairman and global head of energy & clean technology at Moelis. Several deals could be announced in the coming weeks, he added.

This news service reported in May that roughly USD 30bn of sponsor-backed oil and gas assets could come to market in 2H26.

“Private equity firms that had portfolio companies, all of a sudden recognized their assets were worth a lot more, so they went to market,” Trauber said.

Sponsor investment activity is also expected to increase as PE firms deploy more than USD 40bn earmarked for oil and gas investments, Hanson said.

“You have pre-asset teams that are acquiring. You have established private equity-backed companies that are acquiring,” he said.

PE firms may also pursue more joint ventures with midstream operators and power companies linked to the AI data center buildout, Trauber said.

Chevron announced in June that it had partnered with Microsoft and Engine No. 1 to develop a co-located power facility in West Texas for a Microsoft-operated data center.

More deals are expected as upstream producers seek markets near production sites, extending beyond the Permian Basin to regions including the Haynesville and Marcellus, said Bryan Clark, a partner at Bracewell.

The convergence of data-center demand and upstream energy supply is creating new deal opportunities across the natural resources value chain, increasingly tying together power, natural gas, and infrastructure transactions.

“It’s a marriage of necessity,” said Latham & Watkins’ Stolte. “The data center developers need power and a number of upstream companies need a home for their gas because current infrastructure capacity is not sufficient to transport it out of basin.”