Getty Images

Boring is beautiful

The flashiest, best performing sector this year is... utilities?

Utilities stocks are up 27% in 2024, even better than tech

9/17/24 9:48AM

The stock market story of the year has been all about artificial intelligence (or maybe the Fed, if you’re more of a “zoom out” person).

But, despite Nvidia’s inexorable rise and the ongoing dominance of the Magnificent 7, it’s good old fashioned utility stocks — think electricity, water, and gas companies — that are leading the market this year, up more than 27%. That’s better than the Information Technology (+26%) or Communication Services (+25%) sectors.

Utilities stocks outperforming — Sherwood News

So, why are utility stocks soaring?

We never know exactly why any stock is doing anything, but in this case the market seems to be seeking exposure to utilities for two reasons. Firstly, after years of tighter monetary policy, we’re close to getting a cut in interest rates, lowering the borrowing costs for utility companies, as well as making their high dividend yields relatively more attractive to income-seeking investors.

The second reason is more fundamental. Many utilities stocks are indirectly exposed to AI (and you thought this story was about something else), by powering the ever-growing demand for data centers.

In fact, the best performing stock in the Utilities sector of the S&P 500 is a little-known company called Vistra Corp., which only joined the index in May, and has soared more than 130% this year. The second-best performing is Constellation Energy Corp. (+71%), which is America’s largest owner and operator of nuclear power plants.

Unsurprisingly, the management of these companies are talking up the opportunity:

The simple fact is that data centers are coming and they're essential to America's national security and economic competitiveness. We've heard this from a variety of policymakers, a number of nations, including China, are vying for AI supremacy. And it's absolutely critical that the US not fall behind. Time is of the essence. We simply cannot wait years for the data centers that are going to bring transformations. They're going to bring transformations in medicines, bringing new cures to diseases and treatments that research alone cannot do.
Joseph Dominguez — Chief Executive Officer, Constellation Energy Corp [August 6th, 2024]

Altogether, the words “data center” were mentioned 35 times on Constellation Energy’s Q2 earnings call. The count for the same quarter last year? Zero mentions.

Take-Two’s “GTA 6” forecast feels absurdly conservative

Take-Two issued a 2027 net bookings forecast about $1 billion below Wall Street’s estimates. The stock is falling on Friday.

Max Knoblauch2h

The D-Wave 2X quantum system, is operated at the NASA Advanced Supercomputing facility's Quantum Artificial Intelligence Laboratory at NASA's Ames Research Center in Mountain View, Calif., as seen on Tuesday December 8, 2015.

Quantum computing CEOs hope “validating” government backing proves their technology is no longer speculative

The government funding is a push to boost the foundational elements of quantum computing to get the industry ready for prime time. The CEOs of Infleqtion and D-Wave give us their thoughts.

Luke Kawa4h

Helena Cheng4h

Ross Stores surges as Q1 results beat expectations, full-year guidance raised

Ross shares are rising after the company delivered strong Q1 results, with sales topping Wall Street’s projections.

The stock soared 6.3% just after the open.

Key numbers:

Earnings per share of $2.02 vs. $1.47 year over year (estimate: $1.72).
Sales of $6.01 billion, up 21% year over year (estimate: $5.61 billion).
Comparable sales growth of 17% (estimate: 8.58%).

CEO Jim Conroy attributed the results to better traffic in stores. “Customer traffic was the primary driver of the strong sales trend as compelling merchandise assortments, higher customer acquisition and engagement from our ongoing marketing initiatives, and an improved in‑store experience are resonating with shoppers.”

The company also noted that transaction volume grew across all key demographics, including “income levels, ethnicities, and age groups, including younger customers.” Sales were also likely buoyed by standard seasonal tailwinds, including consumer spending from tax refunds.

Backed by the strong quarter, the company lifted its full-year targets. Ross now projects same-store sales growth of 6% to 7%, up from the prior forecast of 3% to 4%, topping Wall Street’s estimate of 4.64%. It boosted its annual EPS guidance to a range of $7.50 to $7.74, versus the prior outlook of $7.02 to $7.36.

Ross Stores has been one of the retail sector’s standout performers this year, rising around 20% year to date as of Thursday’s close.

Max Knoblauch4h

Imax surges on report it’s approached entertainment companies for a sale

Imax is on pace for its best trading day since 2021 following a Wall Street Journal report that it’s exploring a sale. Shares are up more than 15% in premarket trading on Friday.

The premium screen company has reportedly approached entertainment companies for a deal, though talks are early and may not come to fruition. Imax has been boosted in recent years by its higher ticket prices — a K-shaped trend in movie theaters — and last year accounted for more than 5% of domestic box office sales.

Theatrical release windows have become a large debate in Hollywood this year, amid the bidding war between Paramount and Netflix for Warner Bros. Discovery. It’s unclear if an entertainment buyer would favor its own films for Imax over a rival’s.

In the first quarter, Imax booked $81.4 million in sales, beating Wall Street expectations but down about 6.5% from last year, when China’s “Ne Zha 2” smashed records.

Helena Cheng5h

AMD rises as CEO forecasts massive 5-year CPU demand growth

AMD’s shares are rising in premarket trading after CEO Lisa Su delivered an optimistic demand forecast, predicting that the global market for CPUs will grow by more than 35% annually over the next five years, according to Nikkei Asia.

“About six months ago or 12 months ago, nobody was talking about CPU shortages,” Su said at an event in Taipei. “But as [AI] inferencing and agentic AI have really started to ramp up, the CPU market [will] continue to grow very much. Over the next five years, we see the CPU market growing at over 35% each year, and this is an area where we’re seeing very strong demand.”

The comments come as the computing demands of AI agents (in particular, the so-called “orchestration” of tasks) increase the need for CPUs in running models.

AMD also said this week it plans to invest more than $10 billion into Taiwan’s AI ecosystem alongside supply chain partners as it ramps production capacity for next-generation AI infrastructure. This investment will support the manufacturing ramp of AMD’s sixth-generation EPYC CPUs, code-named “Venice.”

Su added that CPU supply is now “tight” as inference demand accelerates, while bottlenecks are emerging across memory, power availability, and advanced packaging.

AMD shares have climbed sharply this year amid broader enthusiasm around AI infrastructure spending. The stock has risen more than 100% year to date. During AMD’s last earnings call, management told investors it now sees the server CPU total addressable market reaching $120 billion or more by 2030, according to Yahoo Finance.