It’s widely recognized that stocks associated with artificial intelligence (AI) have experienced a downturn during the recent market correction. This decline can be attributed to investors taking profits, competition fears stemming from the Chinese start-up DeepSeek, and significant valuation worries. Thus, if you’re looking to purchase at lower prices, concentrating on companies with stable market positions that are currently offered at attractive valuations proves to be a sensible strategy.
The retail electricity and power-generation firm, Vistra (VST -0.90%), and the data center equipment manufacturer, Vertiv (VRT -0.55%), both meet this criteria. Here’s why.
Vistra, Data Centers, and AI
Vistra was among the top-performing stocks in the S&P 500 (^GSPC 0.08%) last year, which explains why investors cashed in some profits this year. Nevertheless, this does not detract from Vistra’s attractiveness as a stock to buy at present.
The company showcased its growth through the following data, illustrating how it augmented its generating capacity from both nuclear and renewable energy sources last year. Thanks to the acquisition of Energy Harbor and its full 15% stake in Vistra Vision (which manages its nuclear operations and renewable projects), Vistra significantly boosted its nuclear capacity and increased its renewable energy output.
|
Fuel Source |
Type |
Net Capacity 2023 (MW) |
Net Capacity 2024 (MW) |
Growth |
|---|---|---|---|---|
|
Natural Gas |
Combustion, combined cycle, steam turbine |
24,313 MW |
24,120 MW |
(0.8)% |
|
Coal |
Steam turbine |
8,428 MW |
8,428 MW |
0% |
|
Uranium |
Nuclear |
2,400 MW |
6,448 MW |
169% |
|
Renewable |
Solar/Battery |
1,358 MW |
1,474 MW |
8.5% |
|
Fuel Oil |
Combustion turbine |
203 MW |
187 MW |
-(8)% |
| Total | N/A | 36,702 MW | 40,657 MW | 10.8% |
Data source: Vistra SEC filings. MW=megawatts.
This is a positive development as the market, especially within the hyperscaler data center sector (large data centers designed to support the demanding growth of AI applications), is starting to view nuclear-generated power as a long-term solution for their energy requirements amid AI expansion.
All three major cloud service providers—Microsoft‘s Azure, Amazon.com‘s Amazon Web Services, and Alphabet‘s Google Cloud—signed agreements last year to obtain power from nuclear facilities. Nuclear power offers a zero-carbon, dependable, 24/7 energy supply, avoiding the intermittency challenges faced by many renewable energy sources.
This makes nuclear energy an ideal choice for hyperscalers aiming to address both their energy demands and their sustainability objectives. Additionally, the growing trend of electrification—covering electric vehicles (EVs), web-enabled devices, smart buildings, data centers, heat pumps, and EV charging networks—continues to fuel demand for electricity both before and after AI became a key point of discussion.
Vertiv, Data Centers, and AI
David Cote, a former CEO of Honeywell and a respected figure in the industrial sector, provides reassurance to investors considering Vertiv stocks. As a partner of Nvidia, Vertiv competes with larger companies in providing essential power, thermal management, monitoring equipment, and services to data centers.
These offerings are crucial for data centers, and Vertiv is currently experiencing a surge in demand, with organic sales jumping 18% in 2024 and orders rising 30%, leading to a significant 30% increase in backlog, now at $7.2 billion. While there was a slight decline in orders from Europe in the fourth quarter, management attributes this to bureaucratic “red tape” rather than a dip in actual demand.
This recent share price dip offers an excellent buying opportunity, with Vertiv now trading at under 24 times the midpoint of management’s projected 2025 earnings and less than 25 times its expected free cash flow for that year. These are compelling valuations for a firm expected to grow its earnings at a 25% annual rate in the coming years.
