⚡ Deep Dive: Not Your Son's AI Play

Blue-chip chipmakers like NVIDIA are monopolizing all the AI hype, but could a classic safe haven sector stand to benefit just as much?

Happy Saturday afternoon to everyone on The Street.

And, welcome back to our new deep dive edition, in which we’ll double-click on a sector, metric, or other investing-related topic we feel isn’t getting the shine it deserves.

Today, the market is largely defined by propulsive AI-powered growth. So why are analysts eyeing this safe haven sector and having a lightbulb moment?

🛎️ You currently have 0 referrals, only 1 away from receiving JPMorgan's Top Picks For June.

TOGETHER WITH HERON

You aren't alone if traditional investment options don’t give you high enough returns. All too often, investment firms keep you from high-yield opportunities. That's why savvy investors should consider diving into private credit with Heron Finance. 

Heron Finance shares opportunities previously reserved for institutions. Their platform gives advantages previously reserved to the ultra-wealthy to any accredited investor. Specifically, Heron Finance offers: 

Yields reaching 11-16% target APY* (net of fees), with interest distributed monthly

Monthly payments mean you get money in your hands in less than 30 days

Passive investing that takes the stress out of managing your portfolio

On top of these benefits, Heron Finance offers stability by carefully filtering deals and monitoring investments. Their commitment to transparency and risk management prioritizes low-volatility and consistent returns. Whether you're looking for short-term opportunities or long-term stability, Heron Finance has the solutions you need.

* APY is not hypothetical but based on underlying APRs borrowers pay in existing loans. Create an account to view more details about those loans.

Lightbulb Moment

It’s not hard to find some winners of the artificial intelligence (AI) boom. But others may be hiding in plain sight.

AI hype continues to drive major indexes to record closes, while catapulting companies like NVIDIA (NVDA) into the stratosphere. In June, the chipmaker briefly became the most valuable company in the world by market cap.

But NVIDIA’s blockbuster success suggests a larger trend that could benefit more than just the biggest blue-chip-makers on the market.

The stocks benefiting most from the boom aren’t the businesses building AI, but the ones powering it. And computational power doesn’t just come from semiconductor companies.

Energy companies and the utility sector are traditionally viewed as safe havens during economic uncertainties and periods of fluctuating interest rates. But given their integral role in powering the AI revolution, could utilities be a growth sector, too?

Whale Songs

Widespread AI adoption and data center expansion have created a surge in electricity demand. It takes a ton of power to run the large language models (LLMs) behind AI tools like OpenAI’s ChatGPT and Google’s (GOOGL) Gemini — which consequently means a rise in electricity consumption.

Goldman Sachs projects the power demand from data centers to surge 160% by 2030 as major tech giants continue to enhance AI capabilities and cloud services.

This transition is already well underway. Texas power company Vistra (VST) closed this week up nearly 135% year-to-date as it rides surging demand while diversifying its portfolio to include more clean energy solutions. Constellation Energy Group (CEG) has also risen more than 80% year-to-date, largely off the strength of its renewable assets.

But some insiders might be feeling like those rallies have peaked. On Friday, market intelligence platform Benzinga flagged an abnormal eight option trades for Vistra — the vast majority bearish.

There’s no telling why institutions or wealthy individuals are singing a different tune than the market. But whether it speaks to some unknown on the horizon, or just liquidation after a strong start to the year, when the whales sing, it’s often worthwhile for investors to listen.

So what other options are out there?

Safe Haven, Growth Sector, or Both?

Heading into the summer, Morningstar laid out its favorite undervalued utilities stocks.

Topping the list is Evergy (EVRG), a regional power company serving Kansas and Missouri. The firm believes Evergy has a competitive advantage from its blend of federally- and state-regulated assets, and predicts a 6% increase in dividends over the next four years. After closing just under $53 on Friday, Evergy is currently undervalued by more than 18% against Morningstar’s fair value estimate of $65.

Morningstar also called out energy giant NiSource (NI) and Midwestern provider WEC Energy Group (WEC) as undervalued names in the utility sector. Both stocks fit the bill as a classic safe haven: with target dividend payouts between 60-70%, each landed an Uncertainty Rating of Low from the firm.

But Morningstar also noted these companies’ impressive potential for growth, primarily driven by significant investments in electric power.

When it comes to NiSource, Morningstar projects up to $17 billion in capital investment in the next five years, largely directed toward electric infrastructure projects to meet rising demand. For WEC, meanwhile, that amount could balloon to nearly $24 billion. WEC holds a majority stake in American Transmission, the Wisconsin-based company operating a high-voltage electric transmission system that powers much of the Upper Midwest.

TOGETHER WITH HERON

You aren't alone if traditional investment options don’t give you high enough returns. All too often, investment firms keep you from high-yield opportunities. That's why savvy investors should consider diving into private credit with Heron Finance. 

Heron Finance shares opportunities previously reserved for institutions. Their platform gives advantages previously reserved to the ultra-wealthy to any accredited investor. Specifically, Heron Finance offers: 

Yields reaching 11-16% target APY* (net of fees), with interest distributed monthly

Monthly payments mean you get money in your hands in less than 30 days

Passive investing that takes the stress out of managing your portfolio

On top of these benefits, Heron Finance offers stability by carefully filtering deals and monitoring investments. Their commitment to transparency and risk management prioritizes low-volatility and consistent returns. Whether you're looking for short-term opportunities or long-term stability, Heron Finance has the solutions you need.

* APY is not hypothetical but based on underlying APRs borrowers pay in existing loans. Create an account to view more details about those loans.

A Different Direxion

One tricky thing about investing in utility stocks is that many of these companies are regional, meaning they are subject to unique headwinds and tailwinds, which can sometimes diverge from broader market trends.

With this in mind, investors who want to play the sector’s potential growth from AI-driven electricity demand may not want to put all their eggs in one basket — unless it’s one heck of a basket.

Direxion’s leveraged ETF, the Daily Utilities Bull 3X Shares (UTSL), offers exposure to all of the aforementioned names, along with many more from the Utility Select Sector Index (IXU) and beyond.

But Direxion doesn’t exactly treat the utility industry as a steady safe haven. Its ETF aims for a lofty daily investment result: 300% of the IXU’s performance.

So whether you’re on the hunt for historically stable dividend stocks, explosive growth potential, or both, the utility sector just might have something for everyone.

What did you think of today's edition?

Login or Subscribe to participate in polls.

Join the conversation

or to participate.