The energy sector has yet to fully recover from April’s tariff tantrum. However, the growth of AI could be the catalyst to reenergize sector performance.
The S&P 500 Energy Index is still trying to retrace to its pre-April level. And the broader S&P index is back in the green. As mentioned, AI could give the sector a much-needed jump start.
Big tech firms are continuously building out their AI platforms as the burgeoning technology becomes more prevalent in business and consumer applications. As such, AI platforms run by data centers will require heavy draws of power.
“Artificial intelligence has the potential to transform the energy sector in the coming decade, driving a surge in electricity demand from data centres around the world while also unlocking significant opportunities to cut costs, enhance competitiveness and reduce emissions,” the International Agency mentioned, highlighting key data points in a recent report.
AI could be the proverbial tide to lift the energy sector boats. If so, one potential trade opportunity exists in the Direxion Daily Energy Bull 2X Shares (ERX ). The fund seeks daily investment results equal to 200% of the daily performance of the Energy Select Sector Index. Within the index are domestic companies from the energy sector industries, including oil, gas, consumable fuels, and energy equipment and services.
Oil Could Make Things Bearish
Countering the bullish trend is the effect of oil prices on the energy sector. That said, if prices dip, traders will want to take a look at the Direxion Daily Energy Bear 2X Shares (ERY ). It takes the opposite side of ERX, allowing for flexibility to make profitable trades in a downtrend.
As mentioned, oil plays a critical role in the energy sector. So another potential play is the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP ). It’s an alternate fund to consider if oil prices head lower, allowing for short positions without the use of futures contracts.
Single-Stock ETF Options
Among the big tech firms vying for AI dominance are the Apples, Microsofts, and Amazons of the world. In some form or fashion, these Magnificent Seven names will be involved with AI.
Traders looking for single-stock exposure to ride the AI trend can look at these Magnificent Seven pairs:
- Meta: Direxion Daily META Bull 2X Shares (METU )/Direxion Daily META Bear 1X Shares (METD )
- Tesla: Direxion Daily TSLA Bull 2X Shares (TSLL )/Direxion Daily TSLA Bear 1X Shares (TSLS )
- Apple: Direxion Daily AAPL Bull 2X (AAPU )/Direxion Daily AAPL Bear 1X Shares (AAPD )
- Amazon: Direxion Daily AMZN Bull 2X Shares (AMZU )/Direxion Daily AMZN Bear 1X Shares (AMZD )
- Google: Direxion Daily GOOGL Bull 2X Shares (GGLL )/Direxion Daily GOOGL Bear 1X Shares (GGLS )
- Microsoft: Direxion Daily MSFT Bull 2X Shares (MSFU )/Direxion Daily MSFT Bear 1X Shares (MSFD )
- Nvidia: Direxion Daily NVDA Bull 2X Shares (NVDU )/Direxion Daily NVDA Bear 1X Shares (NVDD )
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