June 25, 2024

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The best-performing stock on the S&P 500 is a ‘unicorn’ that joined the index less than a month ago and is beating Nvidia

2 min read

The demand to feed the engines of artificial intelligence has helped vault shares of one of the largest US power producers, Vistra Corp., higher even than Wall Street darling Nvidia Corp. 

Investors, including Daniel Loeb, the billionaire founder of Third Point LLC, have been snapping up Vistra stock in a bet that the massive boom in demand — partly fueled by power-sucking AI data centers — will only grow. That’s spurred shares to a more than 300% gain over the past 12 months, making the Texas-based firm the best performer in the S&P 500 Index — a benchmark it joined less than a month ago. Peers trailed, with utility stocks in the index returning about 10% over the same period. 

“Power demand is extremely strong, and it’s being driven by the data center trade,” but Vistra’s mix of gas and nuclear power plants make it “a unicorn,” according to Guggenheim’s Shahriar Pourreza who assigned the stock its highest price target on Wall Street at $133. 

After hitting an all-time high earlier in the week, shares sold off on Friday as Vistra detailed plans to add natural gas capacity in Texas. Investors are concerned this could be “the tip of an oversupply iceberg,” Pourreza wrote in a note to clients, but he views the changes as “somewhat modest.” 

An array of utility companies are expected to benefit from the AI boom with data center power demand poised to more than double by 2030, according to Goldman Sachs’ estimates. But Vistra’s position as one of the few public independent power producers — a status that means it sells electricity at market prices, unlike regulated utilities — has left it in a league of its own and buoyed shares. 

As Vistra is a direct participant in the market, “the clearest investment thesis is that wholesale power prices are going to increase,” Thomas Meric, an analyst with Janney Montgomery Scott, said in an interview. 

Vistra’s roles as a big player in the surging Texas…

Matthew Griffin, Bloomberg

2024-06-01 18:53:05

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