The Biggest AI Deal of the Quarter Is a Utility Merger.

On May 18, NextEra Energy agreed to buy Dominion Energy in an all-stock deal valued at nearly $67 billion. If completed, the combination would create the world's largest regulated electric utility business, with a market cap of around $249 billion and roughly 110 gigawatts (GW) of generation capacity.

On the surface, NextEra is buying Dominion for its 3.6 million electricity customers across Virginia and the Carolinas, plus its natural gas footprint. But the more interesting asset is Dominion's position underneath the AI infrastructure buildout.

Dominion serves Northern Virginia's "Data Center Alley," one of the most important power markets in the world. Loudoun County alone is estimated to handle a massive share of global internet traffic, and Dominion's contracted data-center load reached nearly 51 GW as of March 2026. NextEra's proposed acquisition is a bet to invest in the space powering the AI buildout.

The US grid security regulator projects peak power demand rising by 224 GW over the next decade. The largest tech companies are forecasting more than $700 billion of capital spending this year alone, much of it going towards data center builds that need to guarantee power contracts before they can break ground.

A regulated utility earns a guaranteed return on the infrastructure it builds to serve that load. Lock in the demand, build the grid to meet it, and you collect years of stable revenue. NextEra CEO John Ketchum called this acquisition "a historic moment" for the two companies.

The market is cautious about these claims. NextEra is paying a 23% premium over Dominion's prior close price, and on the announcement Dominion shares rose by ~9% while NextEra's fell more than 4% — a sign that the market thinks the buyer overpaid. It's also far from a done deal. It needs 12–18 months and sign-off from state regulators, Federal Energy Regulatory Commission, and the DOJ.

The main question here is who pays for the demand surge when AI inevitably drives up the power bill — the data centers, or the households next door?

Strip away the utility framing and this deal is about investment moving upstream from AI.

Capital is moving down the AI stack, past the models and the chips, to the physical constraint underneath all of it: electricity. And here's the important part — the acquirer that owns generation and grid position captures the demand regardless of which lab or hyperscaler wins. It's like betting on a sector ETF rather than a company — you're less likely to capture all the gains from a single explosive investment, but you're almost certain to capture some of them.

For corp dev teams, the lesson is broader. The most durable AI exposure may not sit in the obvious places. Teams screening for "AI plays" tend to look at software and semiconductors. Neither of those things work without electricity.

In Q1 2026, strategic buyers accounted for roughly 82.5% of global deal activity, according to FTI Consulting. It's not a busy market overall — FTI reports global deal volume fell 4.4% quarter-over-quarter and 5.3% YoY. It describes the environment as disciplined, targeted, and strategy led (as we've discussed in a previous issue: The Dry Powder Dilemma). Aggregate value continues to hold up on a limited number of larger transactions — fewer deals, but bigger tickets — and corporates are doing most of them.

Megadeals over $5 billion now carry close to half of all global deal value, and Bain calculated they drove more than 73% of the entire increase in deal value in 2025. The deals getting done are large, strategic, and increasingly aimed at securing AI capabilities and infrastructure before a competitor does.

This means the companies actually doing the buying aren't the Private Equity backed investors, but rather the corporate strategics. That's not to say that PE has left the field — PE does expect a busier year. In KPMG's 2026 study, 75% of PE dealmakers anticipate higher volumes, but 43% say their priority is price discipline even at the cost of slower deployment. Sponsors are being picky, focusing on roll-ups, secondaries, and take-privates rather than competing in auctions.

In a cautious market, corporate strategic buyers remain the ones pulling the trigger most often.

When strategic buyers drive the majority of activity, the deal work concentrates inside corporate development and strategy teams rather than at PE sponsors. If you sit in corp dev at an acquisitive company, there's a good chance you're in one of the more productive seats in this market. The firms staffing those teams are positioning for the consolidation wave that the data describes.

The January "SaaSpacolypse" erased roughly $1 trillion in SaaS market cap and pulled public multiples from about 7x to roughly 5.5x. The rising popularity of AI coding and coworking tools made for a lot of headlines eulogizing the SaaS darlings of yesteryear on the assumption that companies would be able to start building their own versions of these same products.

But what we're seeing in the SaaS landscape is not the total wipeout predicted by the headlines. The deals never quite stopped, and by and large, companies, while they are using AI more than ever, have not replaced their entire tech stack with internally-developed tools. SaaS valuations are slowly trickling back up, but somewhere in the mess, the valuation methodology changed materially.

For ten years we've priced software companies on revenue multiples — specifically on annual recurring revenue (ARR). The assumption has always been that profitability today is not as important as growth — that the priority should be to build at all costs and worry about the bottom line later, so we should value companies on their ability to acquire new customers and not on their ability to do so efficiently.

Now that the market doesn't see SaaS as the impervious machine it once did, that assumption has shifted, and for the first time in a long time, software companies are starting to be valued just like everyone else. That means EBITDA, not revenue, is the metric to be watching.

There's a couple of takeaways from this change. First, companies are going to be scrutinized more heavily on their ability to turn revenue into profit. Second, companies that have already been prioritizing profitability but were lumped in with the rest of SaaS will probably continue to see a rebound to their valuations. As of June 3rd, Constellation Software stock is up 11.3% over the past month. CSI is a good proxy for efficient software, as it's a holding company with over a thousand slow-growing legacy software assets — the kind that have focused on profit for decades, not months.