The best-performing stock on the S&P 500 index this year is not AI chipmaker Nvidia (NASDAQ: NVDA). Yes, the stock has run from $48 a share to $140 since January 2. That’s good for a 191% gain so far this year.
Now, the S&P 500 index is comprised of the 500 largest companies listed in the United States. The index is “market-cap weighted” – which means that the biggest companies carry more weight when determining the index level.
So when you see that your S&P 500 index fund has gained 24% so far this year, you can certainly thank Nvidia’s 191% gain for that. Even though Nvidia and Apple have exchanged the crown for the most valuable company in the world several times over the last few months, Nvidia’s massive run this year is the biggest reason why the S&P 500 is trading where it is.
Given the popularity of S&P 500 Index Funds as cornerstone holdings in 401k retirement accounts, it is reasonable to say that Nvidia’s stock price has a lot to do with the retirement plans for millions of Americans.
Reasonable, but maybe a little scary, too. Because if anything bad happens to Nvidia’s share price, it will blow a big hole in a lot of retirement accounts…
This is why you should be paying attention to the best-performing S&P 500 stock. Because it is at the forefront of one sector that is absolutely critical for Nvidia’s success.
The company is Vistra Corp (NYSE: VST). The shares have rallied 231% this year.
Vistra is the largest independent nuclear power provider in the U.S. We’ve written about it several times over the last 6 months, including a specific recommendation to buy the stock at $79 back on August 18.
That recommendation was good for a 72% gain in 6 weeks…
More Energy Stock Gains to Come
Companies like Microsoft, Google, Meta, and Amazon are now being called the “hyperscaler” companies. That’s because they are building out their data centers to accommodate their Artificial Intelligence ambitions as fast as they possibly can.
Of course, that’s why Nvidia is making so much money. Nvidia’s H100 graphic processor units are the very best for running AI applications. The hyperscalers are buying as many of these GPUs as they possibly can:
We’re talking at least $10 billion each from Microsoft, Meta, Google and Amazon every three months.
Getting their hands on these GPUs is one thing. Securing enough electricity to power them is another.
A “search” query that uses an AI application uses 10 times as much energy as a regular Google search. And you can bet AI applications that corporations are using to parse data are even more energy intensive.
The Federal Energy Regulatory Commission (FERC) says that electricity demand is growing twice as fast as anyone expected it to just a year ago. That’s why:
- The hyperscalers are cutting electricity supply deals with utility companies around the country
- nuclear energy stocks have been so strong
- Vistra is the best-performing stock in the S&P 500 this year
- Individual investors should be investing in this space now
When a Bubble isn’t a Bubble
We’ve seen phenomenal gains from several AI stocks over the last two years. More recently, we’ve seen a bunch of stocks in the nuclear energy space double and triple in price.
In some ways, this action looks like just another stock market mania. Like another bubble.
And for some stocks, no doubt this will turn out to be just a bubble. Even for Nvidia. It’s reasonable to think that at some point, the hyperscalers will have bought all of the Nvidia GPUs they need. At some point they will slow their CAPEX spending…
But the new demand for electricity will be more or less permanent. Utilities and utility-scale electricity producers are going to see a sustainable jump in revenue, that will translate to higher profits, bigger dividends and higher stock prices.
Hammer and I are currently working up a new Special Report for Outsider Club readers that features the dividend stocks we expect to benefit the most from higher electricity demand. In some cases, there’s potential for some dividend stocks to boost their payments by 50% to 75%.
That means long-term dividend investors could see a 50% to 75% jump in their annual income. It also means a great opportunity for new long-term income investors to get positioned before these dividends get boosted.
You’ll have our results soon!
Cheers,
Briton Ryle
Chief Investment Strategist
Outsider Club
X/Twitter: https://twitter.com/BritonRyle
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