The Surprise AI Play No One Saw Coming (Spoiler: They're Absolutely Crushing It)

Well, well, well… utilities—yes, utilities—are getting a piece of the AI action. And they’re not just riding the coattails of tech’s latest obsession; they’re leading the friggin charge. Forget your grandpa’s dividend stocks—these power players are mooning like it’s the dot-com boom all over again.

(Source: Giphy) 

Case in point: the S&P 500 Utilities ETF (XLU) is up a casual 28% this year. Again, for all you people in the back, utilities—those boring stocks you didn’t even know were in your 401(k)—are outperforming the broader market’s 23% rise. Who saw that coming? Not me, not you, and definitely not the Tesla bros. But here we are, with Big Tech’s insatiable appetite for electricity pushing utilities to the front of the pack. 

(Source: Yahoo Finance) 

You see, here’s the thing: AI doesn’t run on vibes and machine learning buzzwords—it needs electricity. A lot of it. Think data centers the size of football fields slurping up megawatts like a drunken dehydrated frat boy after College Gameday. And that’s before we even talk about the electric vehicles rolling off assembly lines.

For instance, by 2050, electricity is projected to become the world’s largest energy source, according to McKinsey. Not oil, not lithium… electricity. The same kind that powers your phone, your car, and your smart fridge are all going to be fighting over who gets to drain your power grid faster. And guess who’s making bank from that? Utilities, baby.

(Source: Mckinsey) 

Which is why all eyes are now on a little known stock called: Vistra Corp (VST), a.k.a. the absolute Chad of 2024. This Texas-based power producer has seen its stock skyrocket 244% this year—completely dunking on Nvidia’s 186% rise. Meaning, while Nvidia’s busy being plastered all over the mainstream financial media, Vistra’s quietly raking in cash by keeping the lights on for all those AI servers.

(Source: Market Watch) 

In fact, JPMorgan is so bullish on Vistra, it’s giving it an Overweight rating, along with Talen Energy (TLN) and Constellation Energy (CEG). Why? Again, because these independent power producers (IPPs) are about to feast on the growing electricity demand. AI, electric vehicles, on-shoring manufacturing—these are the trends that are making power grids the new oil fields.

What’s more, if you thought utilities couldn’t get any more oiled up, Microsoft just went nuclear. Literally. As I mentioned last week, Microsoft signed a deal with Constellation Energy to restart a nuclear reactor at Three Mile Island. 

(Source: New York Times) 

In addition, Amazon, Oracle, and Google are all hopping on the nuclear train as well because, apparently, AI needs more power than a Kardashian needs attention. And with data centers projected to suck up 16% of U.S. energy by 2030, we’re only going to see more of these tech-nuclear love affairs. 

(Source: Giphy) 

Which brings me to the million-dollar question: Is this as good as it gets for utilities? Burns McKinney from NFJ Investment Group doesn’t think so. In fact, he thinks there’s still “a little more meat on the bone.” If XLU holds onto its 28% gain, it’ll be the best year ever for the sector. And with AI’s electricity needs only growing, utilities could keep riding this high for a while.

Bottom line? AI isn’t just making tech stocks rich. Turns out, the real winners are the ones keeping the lights on. So, while everyone’s busy fawning over Nvidia and Meta, the smart money’s turning to the guys who are actually powering the AI revolution - hows that for boring ‘ole utilities ehh? 

(Source: Giphy) 

In the meantime, it may be time for some of us to get our hands dirty with some undervalued utilities like Vistra (obviously do your own due diligence to see if this play is right for you) and as always: stay safe and stay frosty, friends! Until next time…

P.S. Get you some of that! 203% in less than four hours?! Are you kidding me? No my friend, I’m not. Which is why after last week's monster winner, we’re eyeing an even more explosive setup for next week… and let me tell you, you’re going to want to be one of the first to know once we drop the ticker. Click here asap to make sure you get it first! 

Stocks.News holds positions in Tesla, Amazon, Google, and Microsoft as mentioned in the article.