Utility stocks, especially those with heavy operations in AI areas seem like a great play to me.
Now the strategy could take time to play out, but when AI continues to grow, electricity demand will increase and they will be the ones setting the rates. (Data centers consume something like 2% of global electricity)
Also, if we head into a period of market turmoil, they act as defensive plays that normally weather downturns, since people always need gas and electricity.
Rates rising is the specter haunting this strategy of course. If inflation continues to rise and takes rates with it, debt payments will increase and utility profitability will suffer.
Other than rates rising, this seems like a win-win scenario to me. On the one hand, you have utility stocks benefiting from AI electricity demand, and on the other hand, you have a portfolio of companies that pay high dividends and have a track record of weathering downturns.
Help me see what I’m missing here.