The Rise of AI within the Stock Market
3 Utility Stocks That Are Hotter AI Investments Than Nvidia
How to Take advantage of the AI Revolution!
As an experienced investor, I've noticed the AI hype train, particularly the rapid rise of Nvidia's (NASDAQ: NVDA) stock, a significant constituent of the S&P 500 index. While Nvidia has garnered much attention as an AI chip maker, there are AI utility stocks that offer compelling investment opportunities. These stocks belong to companies in conventional utility businesses, such as electricity, water, and natural gas, that have significantly invested in AI and machine learning (ML) to reinvent themselves. These stocks combine the stability and income of the utility sector with the growth potential of AI, making them attractive for investors. Here are three AI utility stocks to consider this month.
Xcel Energy (XEL)
Xcel Energy (NASDAQ: XEL) provides electricity and natural gas services to customers across eight states in the U.S. The company's implementation of AI and digital transformation is impressive, particularly in the highly regulated sphere of nuclear power. Xcel has applied AI and automation to enhance nuclear safety, achieving $15 million in annualized savings. This investment supports the company's carbon neutrality vision and reinvests over 70,000 hours of manual work into core activities.
Xcel's investment in AI has fueled bullish sentiment around the stock, which has more than doubled in value over the past decade. Trading at 16 times earnings, near a historical low, XEL is an AI utility stock worth considering, offering a blend of stability and growth potential.
PG&E (PCG)
PG&E (NYSE: PCG) is favored by Wall Street analysts, who consider it a buy due to its positive revenue and earnings per share (EPS) estimates. The company's focus on AI and advanced camera systems is also a key factor in my buy recommendation. PG&E uses high-definition cameras and AI-based smoke detection features to prevent and manage wildfires. Early results from PG&E's AI pilot projects are promising, with the system identifying smoke and potential fire outbreaks one to two minutes before human detection.
This early adoption of AI for disaster mitigation could revolutionize PG&E's operations, reducing maintenance costs and increasing cash flow for investors. Given the increasing unpredictability of wildfire seasons in California, PG&E's proactive approach could yield significant benefits.
Sempra Energy (SRE)
Sempra Energy (NYSE: SRE) is highly regarded by Wall Street analysts and carries a strong buy rating. The company's strategic collaboration with the National Renewable Energy Laboratory (NREL) further bolsters its AI initiatives. The memorandum of understanding (MOU) outlines strategies for AI in clean energy, hydrogen and renewable natural gas, and grid improvements.
Sempra Energy trades at just 17 times earnings, offering a more stable growth trajectory compared to Nvidia's 74 times earnings. This lower valuation, combined with Sempra's strategic focus on AI, makes it an attractive long-term investment. Investors in SRE can expect more predictable returns, avoiding the volatility associated with Nvidia.
On the date of publication, Matthew Farley did not hold any positions in the securities mentioned in this article. The opinions expressed are those of the writer, following the InvestorPlace.com Publishing Guidelines. Matthew has written about financial markets since the crypto boom of 2017 and contributed to various fintech startups. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and New Scientist magazine.
Conclusion
While Nvidia's prominence in the AI sector is undeniable, savvy investors should not overlook the potential of AI utility stocks. Companies like Xcel Energy, PG&E, and Sempra Energy are integrating AI and machine learning into their operations, enhancing efficiency, safety, and profitability. These stocks offer a compelling mix of stability from their core utility businesses and growth potential from their AI investments.
Trading at more reasonable valuations compared to high-flying tech stocks like Nvidia, these AI utility stocks present attractive opportunities for long-term investors seeking both growth and income. By investing in these companies, investors can benefit from the ongoing AI revolution while enjoying the lower volatility and reliable returns characteristic of the utility sector.