Nvidia stock investors have a trillion reasons to celebrate. But shockingly, owners of two S&P 500 utility stocks have done even better this year.
Shares of three S&P 500 stocks, including utilities Vistra and Constellation Energy, are outperforming Nvidia's 81.5% gain this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge.
The fact two S&P 500 stocks in the "sleepy" utilities sector ran past AI darling Nvidia is telling. That's one of the biggest S&P 500 twists of the year. Utilities stocks are the top-performing sector this year — beating even technology stocks.
The AI stock boom is now spreading out to utilities. Why? It's going to take lots of power to run these AI models.
"The excitement surrounding AI has left many investors searching for the next big thing after meteoric rallies in names like NVIDIA and Super Micro Computer," said Adam Turnquist of LPL Financial. "Investors are starting to kick the tires on the sector as a potential derivative play to the AI boom."
The Shocking S&P 500 Utilities Rally
Think utilities are just for widows and orphans? Not this year.
The Utilities Select Sector SPDR Fund is up 12.5% this year while the Technology Select Sector SPDR is up just 6.8%. And that doesn't even include utilities' yields. The utilities ETF is yielding 2.97% vs. just 0.7% in the technology sector.
The utility rally is more than a "play it safe" defensive investment, Turnquist says. AI models consume massive and growing amounts of power. That's a boon for utilities.
"According to the International Energy Agency (IEA), an average Google search consumes around 0.3 watt-hours of electricity, while a similar ChatGPT request requires 2.9 watt-hours," he said. "If you multiply that by nearly 9 billion Google searches a day, it equates to around 10 terawatt-hours (TWh) of additional electricity consumption needed for a calendar year if daily Google searches were replaced by generative AI searches. For context, the U.S. used around 11 TWh per day in 2022."
And utilities are gearing up for this new demand. "Total capital expenditures among a collection of 34 power utilities in the country are forecast to increase by 30% from 2022 to 2026," Turnquist said.
Looking At The Nvidia Beaters
Vistra is the utility stock to beat. Shares of the Irving, Texas-based electric utility are up 143% this year, making it the second-best S&P 500 stock all year.
And it's not just enthusiasm for what theoretically might happen. Analysts already forecast the company will make $6.10 a share in 2024. If that pans out, it would be earnings growth of more than 106%. Earnings in 2025 are expected to fall. But revenue that year is seen jumping another nearly 11%. And don't forget shares of Vistra also yield 0.9%.
But Vistra's not alone. Baltimore-based Constellation Energy's stock is up more than 83% this year, not including its 0.7% yield. And Constellation Energy is another sleeper profit grower. Analysts think the company will make $7.58 a share this year, up nearly 42%. And in 2025, analysts think the company's profit will jump another 7%.
It's important to note the very best S&P 500 stock this year is still a pure AI play: Super Micro Computer, up 182%. But it's getting a real run from utilities of all things.
Better Than Nvidia
Two of the year's top S&P 500 stocks are utilities
| Company | Ticker | Sector | Yield |
|---|---|---|---|
| Super Micro Computer | Information Technology | 0% | |
| Vistra | Utilities | 0.92 | |
| Constellation Energy | Utilities | 0.65 | |
| Nvidia | Information Technology | 0.01 | |
| NRG Energy | Utilities | 1.99 | |
| Howmet Aerospace | Industrials | 0.24 | |
| Chipotle Mexican Grill | Consumer Discretionary | 0 | |
| Micron Technology | Information Technology | 0.39 | |
| Eaton | Industrials | 1.12 | |
| Western Digital | Information Technology | 0 |
