Is overlooked gas the new investor darling over oil thanks to AI?

The dynamics have changed now—especially in the heart of the gassy Marcellus Shale in Pennsylvania. Gas demand is beginning to boom thanks to the electricity feeding frenzy from data centers, skyrocketing liquefied natural gas (LNG) exports, and the ongoing retirements of aging coal plants being replaced by relatively cleaner-burning gas.

Many of the nation’s top gas producers, including Expand Energy, EQT, Range Resources, and Antero Resources, all have major Appalachian footprints and market cap values that have spiked by 25% to 75% the past 12 months.

Meanwhile, crude oil-weighted stocks are almost all down, mired in a prolonged slump of middling pricing, weaker demand growth, and surging OPEC production hikes.

“With the resource-rich potential in this [Marcellus] basin and the growing demand component for AI and data centers and power, it really is setting us up well to help shape this AI revolution that’s going to take place here in the United States,” Range Resources CEO and President Dennis Degner told Fortune.

A decade ago, the gas industry’s fortunes focused on seasonality and how cold each winter would prove, Degner said. “Now we’re talking about power and data centers and LNG essentially doubling over the next few years. Those are all big, diverse demand components that really get us excited about the durability of our business model.”

The Appalachian region—primarily the Marcellus and Utica shale plays in Pennsylvania, West Virginia, and Ohio—produces just over one-third of the nation’s gas—and very little oil—with proximity to Virginia’s growing Data Center Alley and, now, more AI infrastructure expected within Appalachia.

After a couple of decades during which U.S. power demand remained relatively stagnant, domestic electricity consumption is expected to surge by 25% from 2023 to 2035 and roughly 60% from 2023 to 2050, driven largely by AI and data centers, according to the International Energy Agency.

Likewise, record-high LNG exports will roughly double by 2030. Based on new construction underway or greenlit along the U.S. Gulf Coast, LNG exports are expected to rise from 15 billion cubic feet per day in 2024 to at least 30 billion daily by the end of 2030.

“It’s really night and day when you look at the gas names versus the oil names,” said Gabriele Sorbara, energy analyst at Siebert Williams Shank & Co. “The fundamentals for gas are very strong. You’re going to have massive tailwinds.”

Appalachia’s tech boom

Antero chairman and CEO Paul Rady said in his earnings statement that the industry now expects natural gas demand to soar 25% by 2030, led by LNG growth and then by data center power thirst.

That’s an astonishing jump for a U.S. sector that pumps out 107 billion cubic feet of gas per day—already double the amount since the nation’s shale gas boom kicked off 20 years ago.

The top gas producers are all exceeding their production estimates this year with goals to continue ramping up for at least the next two or three years. But they’re doing it without huge spending hikes because of the operational efficiencies gained through drilling and completing wells.

Range Resources, for instance, aims to grow its production 20% by the end of 2027. But Range is doing it while only operating two drilling rigs. For comparison, Big Oil giant and leading Permian Basin producer Exxon Mobil has at least 35 rigs operating in the huge West Texas oil basin.

“These [Marcellus] wells are just massive,” Sorbara said.

Instead, the question marks focus on the exact extent of demand growth, the timing, and the gas pricing, making gas players relatively conservative when it comes to ramping up production, building new pipelines, and inking fixed-pricing deals with data center developers.

For instance, since mid-June, natural gas prices and stock values have slumped a bit because of milder weather and rising gas storage levels. But that’s not slowing the bullishness.

Range sends about half of its Pennsylvania gas toward the U.S. Gulf Coast and LNG exports but, because of pipeline constraints, additional growth is almost all coming from regional data center demand.

In July, Trump touted $92 billion in energy and AI investments in Pennsylvania from hyperscalers, power generators and more. Range, for instance, has a new partnership with Imperial Land industrial park developer in Pennsylvania to fuel new gas-fired power generation for data centers.

Pennsylvania’s Homer City complex will soon become the nation’s largest gas-fired power plant. The massive 1.9 coal plant east of Pittsburgh is being converted to natural gas with up to 4.5 gigawatts of power capacity to serve a sprawling data center campus.

The largest Marcellus gas producer, EQT, recently inked deals to provide gas to Homer City and to Pennsylvania’s planned Shippingport Power Station, also being converted from coal. And EQT is providing pipelines services to fuel planned gas plants in West Virginia in the heart of coal country.

“The cluster effect of these AI data centers and these ecosystems will only continue to build on themselves,” EQT CEO Toby Rice said in his earnings call. “As momentum grows in our operational footprint, we think the opportunity could get larger.

“One of the reasons why people are selecting this region to build their data centers is because they’re building on top of a lot of gas infrastructure,” he added.

There may be a current bottleneck on gas turbines for building power plants, but manufacturing is ramping up and most of the hyperscalers’ projects are a few years from coming online.

The nation’s top natural gas producer is little-known Expand Energy because it was formed just 10 months ago through the combination of Chesapeake Energy and Southwestern Energy. Expand has huge presences in both Appalachia and northern Louisiana’s gassy Haynesville Shale near the LNG hubs.

“It’s a pretty exciting time for natural gas,” said Expand CEO Nick Dell’Osso in the second-quarter earnings call. “You have people recognizing the value that gas plays in the economy, the efficiency that gas creates for the growth in power demand, which is all tied to our growing economy fueled by the innovation associated with AI.”

The gas players are increasingly confident they’re not going to boom and bust. The Marcellus has ample reserves for decades so long as they don’t overproduce.

“We can do this for decades to come, and now you’re talking about a [data center] demand component that’s coming that’s heavily dependent on reliability, repeatability, and the [gas] inventory,” Range’s Degner told Fortune. Of course, Range thrives on all three, he emphasized.