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If someone asked you to guess which S&P 500 stock has gained the most in share value this year, you might be inclined to go with Nvidia. It would be a good guess, but it would be incorrect. Vistra, an energy stock, is the correct answer. This company's stock is up roughly 300% on the year and almost 40% in September alone.
That's strong enough to make it the top-gaining stock in the S&P 500 this year. So, what makes Vistra (NYSE:VST) so special? As it turns out, chipmakers like Nvidia are not the only beneficiaries of AI's emergence as "the next big thing" in the public and private sectors. Energy companies are also seeing a kick-on effect, mainly because AI's appetite for data only matches its appetite for power.
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That's good news for energy stocks, but especially for Vistra because of the type of power it provides. Vistra specializes in operating nuclear power facilities, which AI companies and data center operators increasingly look to as an energy source for the new hyperscale data centers.
Investors are beginning to realize that AI can't reach its potential without access to ample power. Vistra has a jump on the competition because it already has nuclear plants online. These facilities cost billions to construct and take years to come online, but AI's power demands are already beginning to strain local power grids, making energy companies very popular with investors.
Analysts like Antoine Aurimond of Jeffries have taken notice, recently raising his outlook on Vistra's stock price from $99 to $137. If Vistra continues its upward climb, it might hit those numbers. Vistra shares were trading around $38 in January but have since rocketed to $118.54. That news will come as music to the ears of Vistra shareholders.
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Aurimond told Marketwatch why he expects continued growth for Vistra, saying, “The grid is going to be super tight in terms of supply/demand and there's just not enough new capacity coming online because that takes time." He's not alone in his bullish predictions on Vistra, as Morgan Stanley analyst David Arcaro has raised his expectations for Vistra shares from $110 to $132.
Much of the excitement surrounding Vistra and nuclear power providers in general tracks back to energy deals between nuclear energy provider Constellation and Microsoft or Talen Energy's similar pact with Amazon. Although that kind of deal is not currently on the table for Vistra, it's clear many investors and analysts believe there is potential for one.
Aurimond also pointed out that Vistra has a few other cards that make it a potential long-term winner. Vistra's operation is not as large as Constellation's, but other aspects of Vistra's infrastructure may give it an advantage. Aurimond told Marketwatch that Vistra is "one of the biggest holders of efficient gas plants across the country,” which he said "could be a huge source of upside."
The AI revolution is evolving every day and like the internal combustion engine, it will change how the world works in ways that are currently unimaginable. That will create tremendous opportunities for investors in multiple sectors, including energy and data centers. Vistra's performance this year is just the latest example of that.
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This article This Stock Just Surged Past Nvidia To Become The S&P 500's Biggest Gainer In 2024 originally appeared on Benzinga.com