Power utilities aren’t always seen as the most exciting way to invest, but investors might need to rethink that opinion, because the top-performing S&P 500 index stock of the year is retail electricity and power generation utility Vistra (NYSE: VST), up a whopping 210% this year. That beats Nvidia‘s (NASDAQ: NVDA) 155% increase. The two events are not unconnected. Here’s why and how Vistra stock has performed so well this year.
Data centers, electricity demand, and clean energy
It’s no secret that the burgeoning demand for artificial intelligence (AI) applications is the reason for the step change in expectations for data center demand. That’s what’s fueling increased demand for graphics processing units (GPUs) and high-performance computing chips. That’s great news for technology companies like Nvidia and Taiwan Semiconductor Manufacturing.
While the latter are apparent beneficiaries, there are also data center equipment companies like Vertiv Holdings. If you are looking for a value play on the theme, then the heating, ventilation, air conditioning, and refrigeration sector, particularly Johnson Controls, is worth looking at.
However, I digress. This article’s focal point is the need to power data centers and increased electricity demand. In particular, it is in an environment where policymakers remain committed to the clean energy transition. That’s where companies and utilities like Vistra and Constellation Energy (NASDAQ: CEG) come into play.
Vistra
Vistra is a retail electricity and power generation company. At the end of 2023, it counted 4 million retail customers, and the acquisition of Energy Harbor in March added another 1 million. The Harbor Energy deal also added 4,000 megawatts (MW) of nuclear generation to go along with the 36,702 MW with which Vistra ended 2023, with 2,400 MW from nuclear.
Image source: Getty Images.
As such, the deal made Vistra “the largest competitive power generator in the country” and made it the second-largest competitive nuclear generator in the U.S. Investors are falling in love with nuclear energy as a clean, sustainable, and…
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