Up 18% in three months, power stocks have become the "hidden winners" of the AI boom.
Zhao Ying
05-21 21:09
A large number of new data centres require huge amounts of power supply, or bring more returns for utilities, but this wave of construction could also lead to inflationary pressures.
Under the wave of artificial intelligence, an unexpected "winner" emerged-utilities, a traditional industry that now leads Wall Street.
A large number of new data centers require huge amounts of power supply, injecting continued growth momentum into utility companies. The s & p 500 utilities sector has surged 18% in the past three months, the highest in any industry. Year-to-date, shares of Texas power maker Vistra have soared 140 per cent, dwarfing Nvidia's 96 per cent rise.
While utility stocks may struggle to match the high valuations of tech giants, their investment value has been rediscovered as "defensive" stocks with high certainty and stable dividends, according to analysts quoted in the media on Tuesday.
More and more transactions and began to be optimistic about the long-term growth prospects of utility stocks. John Bartlett, president of Reaves Asset Management, an asset management company, said:
That's the direction of the future, as a senior public utility investor.AtlantisvideopokerHe now focuses most of his attention on the development plans of cloud computing giants, such as Google, Amazon and Microsoft, which are investing tens of billions in artificial intelligence systems. What they really need to focus on is their impact on electricity demand.
Citi analysts had predicted that data center electricity demand could account for 10.9% of u.s. electricity demand by 2030, up from 4.5% today. If this expectation comes true, it will mean the need to build more power plants, transmission lines and other infrastructure, as well as more returns for utilities.
Could push up inflation?
The rebound was initially led by independent power producers and then gradually extended to regulated utilities.
Analysts warn that companies with grid equipment that do not have a close relationship with data centres could lag behind the industry. Another possibility is that economic growth slows or the artificial intelligence boom fades before utilities increase capital spending. The longer-term risk is that regulators may tighten controls on the industry if electricity prices rise or power generation is more polluting.
If the expected growth in electricity demand does not materialize in the end, analysts and commentators warn that it could impose a high cost on users for decades.
Jim Lydotes, deputy chief investment officer of Newton Investment Management, said:
The risk is that this wave of construction could bring inflationary pressures and the costs will eventually be passed on to consumers.
As more and more public utility companies put forward new plans, the contradiction between the interests of users and the returns of shareholders may intensify. To pay for new projects in order to financeAtlantisvideopokerUtility companies may have to raise money by issuing shares, while regulators may limit their returns, making them less attractive to invest. Lydotes says:
Utilities will have to raise their own funds to support this growth, and regulators will have to keep their returns within acceptable limits.
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