The Rise of Utilities Sector
The year 2024 has seen the utilities sector emerge as a titan within the S&P 500, with the Utilities Select Sector SPDR Fund (XLU) skyrocketing by 22% year-to-date as of Sept. 11. This surge outpaces all other sectors, notably overshadowing the technology sector represented by the Technology Select Sector SPDR Fund (XLK) by a whopping 9 percentage points.
Utilities’ rise to dominance marks a staggering turnaround from the 40-point deficit they faced against tech in 2023.
Charting Unprecedented Territory
The Catalysts Behind the Utility Surge
Coming as a shock to many, the stellar performance of utilities in 2024 signifies a shift in market sentiments towards defensive stocks like utilities and consumer staples. The tide may be turning, evident in the dwindling momentum of the once invincible ‘Magnificent 7’ tech stocks.
This pivot towards defensive assets gains prominence against the backdrop of soaring macroeconomic uncertainties and the capricious interest rate sphere.
Bank of America’s recent elevation of the utilities sector to Overweight status points to a positive amalgam of income and quality characteristics competing amidst a volatile landscape.
Despite the sector’s lack of favor amongst investors, specific stocks within it have begun witnessing inflows, a promising trend that has been on an upswing since spring.
“Remarkably, the most defensive S&P 500 sector has emerged as the unrivaled titan of the year, defying the consensus on economic prosperity,” remarks Otavio Costa, a macro strategist at Crescat Capital.
Redefining Utility Dynamics with AI-Intensive Data Centers
An instrumental factor fueling the utilities surge is the escalating demand for power linked to the proliferation of AI-operated data centers.
Goldman Sachs’ analyst Carly Davenport emphasizes this trend as she notes, “Data center expansion is significantly ramping up power requirements, with a visible uptick in future pipeline revisions.”
Embracing Goldman Sachs’ forecast, data centers are poised to spearhead U.S. power augmentation, contributing around 90 basis points to the nation’s 2.4% power demand compound annual growth rate till 2030.
This escalating demand is forecasted to spur amplified capital influx into transmission and generation capacities, auguring well for utilities stocks in the foreseeable future.
Leading Utility Stocks of 2024
A string of utility companies has witnessed monumental growth this year on the back of robust earnings, strategic investment decisions, and sectoral tailwinds. Here are some standout utility stocks leading the charge year-to-date through Sept. 11:
| Name | Price Change % (YTD) |
| Vistra Corp. (VST) | 107.95% |
| Constellation Energy Corporation (CEG) | 60.22% |
| NRG Energy, Inc. (NRG) | 54.88% |
| NextEra Energy, Inc. (NEE) | 37.39% |
| Public Service Enterprise Group Inc. (PEG) | 34.52% |
| American Electric Power Company, Inc. (AEP) | 26.86% |
| The Southern Company (SO) | 26.63% |
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