Other than chip stocks, investors have found another big way to play the AI trend. As a result, this year’s list of the best-performing stocks in the S&P 500 has changed.
Vistra Corp. shares VST 3.48% beat Nvidia Corp. shares NVDA 0.22% last week to become the best-performing stock in the S&P 500 SPX 0.28% so far this year. That’s a big deal for a power company that isn’t exactly well known.
At the end of the day on Friday, Vistra shares were up 180% for the year, and Nvidia shares were up 134%. Second place went to Constellation Energy Corp.CEG 0.84% shares, which are also a play on nuclear power. They have gained 118% so far this year.
What’s making Vistra and Constellation stock move so much lately? In this age of AI, investors are optimistic about their nuclear power companies. On the whole, Wall Street is paying more attention to how much power data centers need and how tech companies could use clean energy more and more to meet their power needs.
That was very clear on Friday, when Constellation said it had signed a 20-year deal to buy power from Microsoft Corp. MSFT -0.40% Constellation hopes to restart a nuclear reactor at Third Mile Island thanks to the deal. It will not be the reactor that partially melted down in 1983, though.
He wrote that the deal between Constellation and Microsoft “has very positive sector ramifications, confirming the data-center thesis and broadening the range of opportunities for nukes.” Zimbardo works for Jefferies.
He did say, though, that the deal is special in some ways, such as the fact that Microsoft is going to pay a lot for power. “We will see,” he wrote in a note to clients, “but not many people can afford that price point in scale.”
Shahid Pourreza of Guggenheim added, “The hyperscaler demand for clean megawatts is real.” Maheep Mandloi of Mizuho said that the deal “points to the need for 24×7 clean energy to meet data center needs.”
Also earlier this month, Jefferies started to cover Vistra shares, saying that “contracting nuclear capacity to data centers could yield substantial upside,” though it was still hard to figure out how much the possible upside really was.
Jefferies also said that the business is more than just a data center play. “The general increase in power and capacity prices, higher plant utilization, as well as potential above-market contracts with data centers,” wrote Julien Dumoulin-Smith of Jefferies at the time, as things that will help Vistra.
Vistra shares have been on a strong rise so far this year. This could stop Nvidia shares from becoming the S&P 500’s best-performing stock twice in a row, but there’s still a lot of market action left in the year. In 2023, Nvidia stock was the biggest gainer in the S&P 500. As far back as 1999, only AMD 0.51% stock from Advanced Micro Devices Inc. had held that title in back-to-back years.
