Black Hills faces AI power boom and merger risk after strong run

If you own a utility stock for stability, this is the moment to pay attention.

Black Hills Corp (NYSE:BKH), trading at $72.30, is in the discovery phase of a potential merger with NorthWestern Energy, with regulatory approvals still pending.

At the same time, it is accelerating its data center pipeline to more than 3 gigawatts, with interest from major technology firms including Meta and Microsoft.

That could significantly shift how Black Hills allocates capital. A tie up with NorthWestern Energy may alter regulatory risk, capital requirements, and overall customer mix.

Meanwhile, supplying power to large scale tech clients would move more of the company’s growth toward AI driven demand instead of traditional regulated utility earnings.

Investors have already been reacting to company level developments. Black Hills has posted a 27.0% return over the past year and 42.1% over the past five years.

The stock is up 3.8% year to date, and its value score of 3 suggests it is not viewed as deeply undervalued. A 0.5% gain over the last 30 days reflects steady positioning as the merger and data center narrative unfolds.

At US$72.30, shares sit about 10% below the US$80.50 consensus analyst target. Simply Wall St views Black Hills as trading close to estimated fair value, meaning the current price is not flagged as a major discount or a significant premium.

One pressure point stands out. Interest payments are not well covered by earnings, so any additional debt or capital expenditure tied to a merger or data center expansion warrants close monitoring, particularly if the P/E remains below the 20.5x industry average.

For investors, this is about more than a headline. It is a question of whether Black Hills can balance regulatory approvals, capital discipline, and surging tech power demand without straining its financial profile.