00:00 Speaker A
A new chart of Bank of America has caught my attention. It shows a steady rise this year in consumer electricity bills. BFA’s headline on this chart, AI sparks a rise in utility bills. Interesting. My question of the day is this, is this in fact true? And if so, do you back up the truck on utility stocks? Uh, Ally, let me start with you here. Have you have you know actually let me go around the panel. Ally, have you seen a rise in your electricity bill?
00:31 Ally
I I did last year, for sure, especially in the winter months. I I would say in the summer months it’s a little better, but I my electricity bill went up five times during the winter for heat. So I can only imagine what the ramifications are for for other folks out there.
00:46 Speaker A
Anez, how about you?
00:48 Anez
Yes, and this is why I’m getting heat pumps that make it more electric uh efficiency, uh and this is why I want solar panels. Yes, yes, and yes.
00:58 Speaker A
Art, how about you?
00:59 Art
I live in the northeast, so you can you can guess my answer. Absolutely inefficient electrical generation that we have in the northeast and and even with all the natural gas we have around the country, we don’t have the pipes to get it to the places we need it. So yes, the answer is yes.
01:13 Speaker A
I am with you all too as well. My bill has gone up. Well, Art, can we blame AI? Or are we reading too much into this? And and if we are blaming AI, isn’t this just going to get worse?
01:25 Art
Well, certainly, the estimates for power and energy demand, um that go out all the way to 2030 uh is massive. So the that’s the reason why utilities are one of the best performing sectors in the S&P 500 right now. It’s AI adjacent, as the industrials are. I think when you look at this, that you know, there’s a couple ways you can play this. The
01:43 Art
Constellation energy, which spun out from Exon, um three years ago, is the Nvidia of uh of of energy companies like uh electricity providers. And uh that one indeed is pulling the entire group up. It’s independent. It’s not a regulated uh energy provider, but it’s cutting deals with companies like Meta and and Alphabet etc to provide that power. The other way to play it is just what you just had up on the screen is the XLU. That gives you the whole basket of utilities. Demand is not slowing down anytime soon and and and there is a reason why utilities uh the second or third best performing or the third best performing group in the SP 500 on a year-to-day basis. It’s that adjacency to AI.
02:29 Speaker A
All right, we’ve been trained over many years to say utilities are safe havens. People go to utilities for dividends when things get a little rough in the broader market. Do you think that needs to be put to bed? Are utilities actually growth stocks at this point because of what we’re seeing in AI?
02:49 Art
Yeah, they’re certainly growth stocks right now and especially on the unregulated side, right? The the reason they’re so safe on the regulated side is you the government gets to tell you how much you can charge and and and and you have to apply for increases. So it’s a pretty steady Eddie, great dividend payers and they’re they’re all dividend aristocrats on the restricted side. On the independent side, it’s the wild wild West out there. And right now, I wouldn’t say that that’s safe if you look at constellation. It’s up 700% since it’s spun out from Exon. It’s up about 60% year to date. But it’s the Nvidia of uh electricity producers. So clearly it’s it’s the one that’s winning this race for right now to power artificial intelligence.
03:20 Speaker A
Anez, uh, it’s great to see, you know, stocks moving up into the right on these AI deals, but at the end of the day, every new factory that we get, every new server uh farm that gets put out there, it might just support higher electricity bills. I mean, it’s great to see what Jensen Wong is doing, and Sam Altman, it’s cool stuff. It’s impactful stuff, but it’s going to have real consumer effects beyond just uh using agents in our computers.
03:41 Anez
It will. I mean, you’re not just talking about upgrading the grid, you’re also talking about expanding the grid. So just as Art was just mentioning, some of the energy providers, those are the are the ones that have been sort of high flyers recently and also the equipment providers as well, the GE Vernovas of the world. Those are the ones that have been, uh, you you’ve been seeing stock prices and those go higher and and uh, yes, this translates to that you will see on your energy bill most likely, uh little line items that have to do with upgrading that grid.