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- Want to cash in on the AI boom? AI plays like Super Micro Computer (SMCI) and Nvidia (NVDA) are so obvious. How about another S&P 500 stock, Vistra (VST)?
- Vistra has seen its shares rocket more than 152% this year thanks to the AI boom, outperforming even Nvidia’s 92% rise.
- “The growth trajectory of a utility company is not comparable to these poster children of AI, investors are starting to kick the tires on the sector as a potential derivative play to the AI boom,” said Adam Turnquist, strategist at LPL Financial.
Discover how utilities like Vistra are becoming integral to powering AI technologies, driving unprecedented growth in the sector.
Electric Utilities At AI Epicenter
Talk about an unsuspecting S&P 500 sector winner from AI mania. The Utilities Select Sector SPDR Fund (XLU) is up 14.4% this year so far. That makes it the top-performer among the 11 S&P 500 sectors. It’s topping even the Technology Select Sector SPDR Fund (XLK), which is up 10.6% this year. Three of the top 10 S&P 500 stocks this year are utilities: Vistra, Constellation Energy (CEG) and NRG Energy (NRG).
Surging Demand for Power
Demand for AI power needs is already picking up. On May 2, Dominion Energy (D) CEO Bob Blue noted big jumps in demand from data center customers, many of which power AI work. “Historically, a single data center typically had a demand of 30 megawatts or greater,” he said. “However, we’re now receiving individual requests for demand of 60 to 90 megawatts or greater and it hasn’t stopped there. We get regular requests to support larger data center campuses that include multiple buildings and require total capacity ranging from 300 megawatts to as many as several gigawatts.”
Profiting On S&P 500 Utilities With ETFs
ETFs are a good option for investors looking to profit on this surprising AI stock boom. But again, not in the obvious way. “Utilities are likely to benefit from higher electricity costs of businesses tied to artificial intelligence,” said Todd Rosenbluth of Vetta Fi. “But unlike semiconductors they pay dividends and have consistent earnings records. Utilities are a more defensive sector that holds up well during times of market volatility.”
ETF Strategies for Utility Stocks
One way to play the utilities AI boom with ETFs is with the Utilities Select Sector SPDR Fund, Rosenbluth says. The ETF, though, is market-cap weighted. That means 14% of assets are in NextEra Energy (NEE). Meanwhile, Southern (SO) and Duke Energy (DUK) are next largest at 7% positions each. None of these stocks are up as much as Vistra this year. NextEra is up nearly 27%, though.
Conclusion
The unexpected surge in utility stocks as a derivative play on the AI boom presents a unique investment opportunity. With increasing power demands driven by AI technologies, utility companies like Vistra are proving to be more than just stable dividend payers—they are becoming crucial players in the tech revolution.
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