Investing

2 Blistering Utility Stocks That Have More Than Doubled in 2024

Joey Frenette

Published: October 26, 2024 12:00 pm

Last Updated: November 5, 2024 3:07 pm

Who says utility stocks are boring defensive investments that can’t surge in parabolic fashion? Undoubtedly, the artificial intelligence (AI) boom and the rising energy consumption demands for next-generation AI data centers have pushed a specific group of utility firms into the spotlight. Undoubtedly, the next wave of large language models (LLMs) could become power hogs that put a drain on the grid.

While the power efficiency of such models is also taken into consideration, I do think larger and power-hungrier models in the cloud could continue to be the theme going into the new year. As technology titans look to meet the power needs without driving up carbon emissions and taking points off their ESG scores, many have looked to nuclear energy as a solution. And that’s been a huge boon to the utility companies with signficant nuclear energy capabilities and expertise.

Undoubtedly, most of the AI tidal wave has already worked its way through the nuclear energy scene, with shares of Vistra (NYSE:VST) and Constellation Energy (NYSE:CEG) now up around 283% and 136%, respectively, in the past year.

However, the big question remains whether data power deals and the continued shift to nuclear power can pave the way for a growth profile that’s more impressive than Wall Street is currently expecting. Indeed, Vistra and Constellation are the hottest AI players on the market. And at current levels, their valuations still make sense given their front-row seats in fuelling this AI data center boom.

Let’s look closer at these two AI power players to determine which has the most promise going into 2025. While I don’t think either overheated name can double again in the new year, I do think that a double in the next four to five years is realistic should the AI data center surge continue going strong.

Key Points About This Article

• Nuclear energy could play a huge role in powering the AI data centers of the future.
• Vistra and Constellation Energy are hot movers as the AI boom sweeps through the nuclear utility scene.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Vistra

Vistra stock came from out of nowhere two years ago, soaring an incredible 471% in the timespan. It’s easy to conclude that one missed the boat with the name, but there’s no shortage of Wall Street analysts who think it’s not too late to pick up shares at current levels.

Recently, JP Morgan (NYSE:JPM) analyst Jeremy Tonet, a big name on Wall Street, said Vistra’s an American power producer that’s “in the catbird seat.” Going into the new year, Mr. Tonet “would not be surprised” if the firm were to land additional nuclear contracts. He views the open door for such potential deals as a catalyst for the stock. I think Tonet is right on the money.

Vistra seems to have the wind at its back, making a continued melt-up likelier than a meltdown. Shares don’t look expensive at 17.27 times forward price-to-earnings (P/E).

Constellation Energy

Constellation Energy is another hot performer that can sustain its run. After tripling in two years, the company is now on the radar of most AI upside-seeking investors. Like Vistra, Constellation isn’t all too expensive at 29.3 times forward P/E, which is only a tad on the high side of the historical range.

With a 20-year power-purchase agreement with Microsoft (NASDAQ:MSFT), Constellation has one of the most influential and largest firms on the planet on board. As other AI firms look for similar deals of their own, one has to think that Constellation may have the edge. After all, it is serving one of the biggest, brightest, and perhaps most magnificent Mag Seven names out there.

Though it could be a wobbly, volatile ride over the next year, several Wall Street pros see the stock rising even higher from here. If there are more big-name nuclear power deals to come in the new year, perhaps shares of CEG can sustain their momentum. Of course, investors should ensure they have a strong enough stomach before even thinking about picking up shares because the name is sure to amplify any moves made by the AI plays.