By Sourasis Bose

Nov 22 (Reuters) - U.S. energy infrastructure providers

are on pace to post their best year in many, as investors hedge

against volatility in the commodity markets and wager on

long-term demand fueled by the rise of power-guzzling

technologies such as generative AI.

The Alerian Midstream Energy Index, which tracks

major North American pipeline and storage companies, is up about

46% this year after hitting a record high in March. This

compares with the nearly 25% gains in the broader S&P 500 index

during the same period.

Alerian index constituents Kinder Morgan ( KMI ) and Targa

Resources ( TRGP ) are set for their best yearly gains, while

Williams Co is on track for its best year in nearly two

decades.

"We've seen fairly substantial flows from a lot of

institutional investors over the past six months," said Kenny

Zhu, research analyst at Global X ETFs, a New York-based

provider of exchange-traded funds.

Energy infrastructure firms' fixed-fee model shields them

from the volatility in oil and gas prices, while the sector also

benefits from surging U.S. production.

Payouts in the form of dividends and buybacks due to stable

cash flows are also pulling in small investors, experts said.

The explosive growth in artificial intelligence and the

related insatiable demand from data centers to run the

power-hungry applications have reinforced the segment's appeal.

"There's no artificial intelligence without energy

infrastructure, because AI needs the power 24 hours a day, seven

days a week," said Rob Thummel, senior portfolio manager at

asset management firm Tortoise.

Additionally, several liquefied natural gas export projects

are expected to come online in the latter half of the decade,

further boosting demand for pipelines.

However, building new large-scale pipelines is not an easy

task in the U.S., as they often run into regulatory hurdles,

making existing infrastructure even more valuable.

"If you have pipelines in the ground right now, you're in a

really good spot because those are going to become more and more

valuable as demand continues to grow," said Zack Van Everen,

director of research at TPH&Co.