Is PG&E an AI Power Play? Why Options Traders Are Betting Big

Utility stocks are typically known for their predictability, not for explosive growth. It is especially noteworthy, then, when market indicators begin flashing for one of the utility sector’s most-watched companies. For Pacific Gas & Electric (NYSE: PCG), a dramatic, recent spike in bullish activity suggests some professional investors believe the company is at a major inflection point.

This unusual interest warrants a deeper look into the fundamental drivers that could be fueling a powerful turnaround, one that links the future of California's power grid to the global boom in artificial intelligence (AI).

Why Traders Are Suddenly Betting on a PG&E Rally

A clear signal of shifting sentiment appeared on July 25, when the trading volume of bullish call options for PG&E stock soared by over 380% compared to its daily average. A call option gives an investor the right to buy a stock at a specific price in the future, making it a direct bet on a price increase. A surge of this magnitude signals a wave of new confidence.

A closer look at the trading data shows significant interest in options expiring in September 2025 with "strike prices" of $16, $19, and $20 per share. With PG&E’s stock price currently trading in the 13-14 range, this pattern reveals that investors are positioning for a sustained rally.

They are betting on a potential upside of 20% to 50% over the coming months, which raises a critical question: What fundamentals justify such optimism?

A New Era of Stability Creates Opportunity

The justification for this bullish sentiment is found in the company's second-quarter 2025 earnings report. The results paint a picture of a business that is successfully stabilizing its operations and finances. The company confidently reaffirmed its full-year non-GAAP core earnings per share (EPS) guidance of $1.48 to $1.52. This signals that management's plan is on track, providing the predictability investors value.

This stability is built on a foundation of tangible operational achievements that reduce risk.

• Wildfire Safety: In Q2 alone, PG&E placed 32 miles of powerlines underground and strengthened 103 miles of grid infrastructure in high-risk fire zones.
• Financial Health: The parent company, PG&E Corp., holds a Positive credit outlook from S&P Global Ratings. This puts it on a path to achieving an investment-grade rating, which would lower borrowing costs and improve profitability.

The company is also managing its regulatory environment more proactively. It recently submitted its smallest rate increase request in a decade. While legislative debates in Sacramento remain a key watch item, earnings call that the company's $63 billion, five-year financial plan can withstand various outcomes, CEO Patti Poppe stated on the call without diluting shareholder value by issuing new stock at current prices.

How the AI Boom is Fueling PG&E's Future

While a stable foundation is essential, the catalyst igniting genuine investor excitement is a powerful, new growth engine. PG&E’s earnings report revealed that demand for its new data center pipeline has swelled to an immense 10 gigawatts.

This surge is a direct result of the artificial intelligence revolution centered in PG&E’s Northern California service area. The massive server farms required for AI development consume vast amounts of electricity, giving PG&E a unique growth opportunity that most other utilities lack.

For investors, this new demand is the engine of future profit. Meeting this demand will require billions in new infrastructure investment.

For a regulated utility, these capital investments are added to its rate base, which is the core asset portfolio on which the company earns a guaranteed profit. This growth in the rate base directly supports the company's goal of delivering at least 9% annual EPS growth through 2028.

This growth story also presents a winning narrative for customers and regulators. As management explained, every gigawatt of new data center load can reduce residential bills by 1-2%, as the grid's high fixed costs are spread over more sales.

Confirmed projects with major tech players like Microsoft (NASDAQ: MSFT) make this growth feel tangible and imminent, positioning PG&E as a key partner in the AI economy.

A Compelling Shift from Recovery to Growth

The recent surge in bullish options trading appears to be a rational market signal indicating PG&E's fundamental transformation. The company is successfully moving beyond its recovery phase by stabilizing its operations and proactively managing its risks. 

More importantly, it has secured a robust, long-term growth catalyst by positioning itself as the energy backbone for the AI industry. For a company long defined by its past challenges, the narrative is compellingly shifting to one of durable, technology-driven growth.

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