How AI Could Transform Utilities into Growth Stocks

The Ragin’ Cajun James Carville was Bill Clinton’s campaign manager in 1992.

Carville had a sign that said: “It’s the economy, stupid” in his office. The campaign’s laser-like focus on the economy was so powerful it helped propel a previously unknown governor to the White House.

Investors can also benefit from a laser-like focus on one topic. Of course, finding that one idea can be hard. Investors have an unlimited number of topics they can focus on. Many take on the challenge of studying different ideas to identify potential investments.

My colleague Adam O’Dell is a master of laser-like focus. He takes the big story and drills down to the single best idea.

That’s what he’s done with artificial intelligence (AI). We already know AI is the next big thing. However, it’s not easy for investors to zero in on the best investment in a multi-industry trend.

Microchips will power this technology. However, many chipmakers have already had great runs. Some are overvalued, and others have limited upside potential.

Hardware makers are also likely to benefit from the AI boom. They share similarities with chipmakers in that many have limited upside potential at this point.

Some analysts focus on data centers. They argue all that hardware will need a home, which will boost the construction of data centers.

That’s true. However, it’s now a common idea among investors, and the edge has worn off. Again, the upside here could be limited.

Adam has looked carefully at the demands of AI and focused just on power — the electricity to run all these applications for AI. This has led him to an investing opportunity with massive profit potential.

To borrow Carville’s words, it’s the power, stupid…

AI Is Set to Ignite a Dormant Sector

Data centers will need more power to run AI queries submitted to the cloud.

Microsoft is working on putting AI on our phones, which means mobile will draw more power, and users will need to recharge them more often. With expanded AI in our cars, EV owners will need to recharge more frequently.

In short, everything that benefits from AI will draw electricity from somewhere. This will set up a boom in the long-dormant utility sector.

Utilities have long been considered a boring investment. Utilities Select Sector SPDR Fund (NYSE: XLU), a benchmark for the utility sector, has delivered an average annual return of 8.9% over the past 10 years.

At the same time, the S&P 500 Index provided an average annual return of 12.7%.

Both of those returns include dividends, which represent 64% of the total returns from utilities. For comparison, dividends provided less than 19% of the total returns of the S&P 500.

But the AI boom looks ready to change the reputation of the sector. Instead of being known for dividends, utilities may — for the first time since the 1920s — become growth stocks.

Well, not all of them. Only a few stocks in this sector are poised to participate in the AI boom.

Adam identified what could be the biggest winner that he shares in his research for you right here.

Until next time,

Michael Carr
Editor, Money & Markets Daily


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