The S&P 500 Utilities Index is up over 20% year to date, outpacing even the broader S&P index. Traders can use utilities as a piggyback play on artificial intelligence (AI) as the demand for electricity grows.
Big tech companies are continuing to invest in bolstering their AI platforms. But it will require the necessary electricity to power these robust applications. That said, as AI use expands, the demand for electricity will also increase.
“What was introduced to utilities is this growth [component. And] that is AI and the need for electricity and, more importantly, the potential for pretty substantial electricity growth,” said Rob Thummel. Thummel is managing director and portfolio manager at Tortoise Capital Advisors LLC.
Additionally, AI stocks may be out of reach for investors, with household names like Nvidia well over $100 per share and growing.
Investing in utilities has “gotten investors excited as they look for cheaper ways to invest in AI and not have to buy more expensive technology stocks," added Thummel.
The hype around AI continues to reach fever pitch. So utilities should also be up for consideration as a growth prospect. For short-term traders, there are options to get utilities exposure.
3 Corroborating Trades
Rather than trade individual stocks within the utilities sector, consider getting broad exposure to the industry with the Direxion Daily Utilities Bull 3X Shares (UTSL ). The triple exposure could amplify profits should the utilities sector continue to see strength alongside AI.
UTSL seeks daily investment results equal to 300% of the daily performance of the Utilities Select Sector Index. The index contains companies from the utilities sector that include the many industries. Those include electric utilities; multi-utilities; water utilities; independent power producers and energy trades; and gas utilities.
Of course, AI continues to be a persistent theme that could allow traders to continue reaping benefits. To that end, they should look at the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 2X ETF (UBOT ). The fund seeks daily investment results equal to 200% of the daily performance of a few indexes. These would include the Indxx Global Robotics and Artificial Intelligence Thematic Index. That index aims to provide exposure to companies in developed markets expected to benefit from the growing adoption and use of robotics and/or AI.
For even more concentrated exposure in AI, the aforementioned Nvidia has been well-documented with its 175% gain this year. Traders who want to continue maximizing profit potential on Nvidia’s rise can also use the Direxion Daily NVDA Bull 2X Shares (NVDU ).
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