Global AI demand drives utilities gains

Savvy investors have been wagering for years that AI workloads would lift the utilities sector, and that wager has now gone mainstream, Bloomberg reports. The biggest ETF tracking the sector, the Utilities Select Sector SPDR, is up 6.8% so far this year. Utilities — once bought mainly for predictable dividends — are suddenly being treated as AI plays.

Part of what’s driving this is simple rotation. Investors trimming pricey tech stocks still want exposure to AI, and regulated utilities offer a steadier, dividend-paying way to stay in the AI game without trying to wager on which firms will deliver returns. Power companies are effectively on the W side of AI disruption, because so much capital is flowing into generation and transmission, Citigroup analyst Ryan Levine told Bloomberg.

Momentum is buoying big players in the sector, with NextEra Energy recently hitting a record high after raising its dividend and securing nuclear power agreements with Microsoft and Meta Platforms. Meanwhile, Duke Energy and Constellation Energy have also climbed, supported by expanding data center transactions.

Lower long-term treasury yields have helped too, since utilities rely heavily on borrowing to fund infrastructure. But with positioning now crowded and bond yields under scrutiny, the trade looks more delicate than it did a few months ago.

An “extreme buying frenzy” is how analysts at SentimenTrader describe buying momentum, warning that valuations are starting to stretch beyond fundamentals.

THE CLOSING BELL-

The EGX30 fell 3.0% at Thursday’s close on turnover of EGP 5.6 bn (9.7% below the 90-day average). Regional investors were the sole net sellers. The index is up 21.1% YTD.

In the green: Rameda (+2.4%).

In the red: Ibnsina (-5.4%), Raya Holding (-5.3%), and TMG Holding (-5.0%).