Contents

The Coming Surge in Electricity Demand

Investment Opportunities in the AI Boom

Companies Meeting Utility Forecaster Criteria

NextEra Energy

Sempra

Companies Meeting Rapier’s Income Accelerator Criteria

Vistra Corp.

NRG Energy

Companies Meeting Income Forecaster Criteria

Energy Transfer LP

Enbridge, Inc.

Investing in the AI Boom: Why Utilities and Energy Stocks are Poised for Growth

The rapid advancements of the artificial intelligence (AI) revolution permeate the news. Key enablers like NVIDIA have seen huge gains in the stock market.

AI is experiencing the kind of meteoric growth McKinsey & Company says could transform it into a $15 trillion behemoth.

That’s the GDP of Germany, Japan, and India combined… and it’s nearly HALF the GDP of the United States today.

More importantly, a massive chunk of that money is going to gush into the niche I’m going to share with you today.

Microsoft’s founder sees AI’s potential as well…

“The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone… Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.” – Bill Gates

And billionaire entrepreneur Mark Cuban is confident the world’s first trillionaire will be someone who masters AI in a unique way…

“I am telling you, the world’s first trillionaires are going to come from somebody who masters AI and all its derivatives and applies it in ways we never thought of…” – Mark Cuban

Both bold statements from powerful men…

Many technology companies stand to benefit from the AI boom. But the opportunities this boom is creating extend well beyond technology companies.

A surge in electricity demand is looming on the horizon, driven by the expansion of AI data centers. That’s on top of demand growth expectations from the electrification of vehicles. The largest utility companies in the U.S. are forecasting unprecedented increases in power needs, signaling a unique investment opportunity in the utilities and energy sectors.

The Coming Surge in Electricity Demand

With AI technology rapidly advancing and data centers multiplying, electricity consumption is set to skyrocket. The consulting firm Rystad Energy recently reported that the tech sector’s data centers and the rise of electric vehicles will add an estimated 290 terawatt-hours of electricity demand by 2030. This increase is equivalent to the total electricity consumption of Turkey, the world’s 18th-largest economy.

And that’s just one opinion…

Scientific American says…

“The AI Boom Could Use a Shocking Amount of Electricity”

Business Insider agrees, saying that Amazon’s data centers in one state alone…

“…can consume about half the power of New York City.”

The Washington Post says…

“One large data center complex in Iowa owned by Meta burns the annual equivalent amount of power as 7 million laptops running eight hours every day…”

As tech giants such as Amazon, Google, Microsoft, and Meta rush to meet the demand for AI-driven services, they require significant amounts of power—often equivalent to the output of a nuclear reactor. This places immense pressure on the U.S. power grid and underscores the need for substantial investment in energy infrastructure.

Investment Opportunities in the AI Boom

Most investors whiffed on this opportunity at the beginning of the AI boom. But a chip stock’s share price can’t go up forever.

That realization sent investors scrambling to find the next big thing in AI. Which incredibly enough, turns out to be the utilities and energy sectors.

“US power demand likely to experience growth not seen in a generation.” – Goldman Sachs

“The AI Boom is fueling an insatiable appetite for electricity…” – The Wall Street Journal

“Wells Fargo is projecting AI power demand to surge 550% by 2026, from 8 TWh in 2024 to 52 TWh, before rising another 1,150% to 652 TWh by 2030. This is a remarkable 8,050% growth from their 2024 projected level.” – Forbes

Here’s what The Wall Street Journal says…

“Utility stocks are suddenly white-hot, thanks largely to artificial intelligence’s thirst for electricity. Investors accustomed to thinking of the sector as sleepy and safe need to realize the game has changed.”

That’s music to the ears of my Utility Forecaster advisory subscribers, where utilities and energy companies are core holdings. With AI set to transform industries and daily life, electricity demand will continue to rise, driving growth and innovation in the utilities and energy markets.

As companies in these sectors expand their capacity to meet growing needs, they will likely see substantial returns.

But those opportunities aren’t limited to Utility Forecaster subscribers. In fact, because of our focus on maintaining low volatility, some of the most explosive opportunities would be entirely inappropriate recommendations for Utility Forecaster.

That’s where my other publications come in. Rapier’s Income Accelerator (RIA) is devoted to the conservative use of covered calls and cash-covered puts to boost annual returns on income stocks. I apply five screening criteria to identify promising companies with high growth and income potential. The objective is to obtain annualized yields of at least 8% while maintaining a high return potential if shares are called. For the cash-covered puts, we seek yields of at least 10%.

Income Forecaster also uses several criteria, but they differ from those in RIA. Here, we are looking for companies that can sustainably pay dividends with a yield greater than 7.5%. With rare exceptions, we don’t utilize options in this publication.

Numerous investment opportunities are being created by the AI revolution. Major utility companies and energy companies will enable this revolution. Below are some suggestions for how you can be a part of this transformative era, with picks suitable for each of my publications.

Companies Meeting Utility Forecaster Criteria

Key factors in determining eligibility for initial inclusion in the Utility Forecaster portfolios are:

• The company must reside in a conventional income sector (e.g. utilities or energy)
• The company must pay dividends
• The company must have moderate to low volatility relative to the S&P 500
• Analysts must have high regard for the company

Volatility is measured by “beta”, which reflects how much a company’s shares tend to move relative to the S&P 500. A beta of less than 1.0 means the company is less volatile than the S&P 500.

The consensus analyst ratings factor into a company’s evaluation. For this, I use FactSet, a data aggregator that compiles financial metrics and analyst ratings for various companies.

Here are two companies that meet these criteria and are poised to benefit from the AI boom.

NextEra Energy

NextEra Energy (NYSE: NEE), the largest power company in the S&P utilities sector, is at the forefront of addressing this demand. NextEra generates, transmits, and sells electricity primarily produced by natural gas and nuclear power, serving approximately 12 million people in Florida.

The company has a growing portfolio of renewable sources such as wind and solar, along with nuclear and natural gas. NextEra also engages in the development and operation of clean energy projects, including renewable generation and battery storage, with a 300-gigawatt pipeline of projects aimed at meeting the growing electricity needs. With a substantial capacity of 33,276 megawatts and a vast network of 90,000 miles of transmission lines, NextEra is a major player in both retail and wholesale energy markets.

NextEra recognizes the growing importance of data centers and recently plugged 740 MW of new solar and storage projects into service which are being used to support data centers in Arizona and New Mexico. Both projects are now among the largest battery storage facilities in their respective states. In combination with their co-located solar each project enabled the local utility to serve their customers need for new, reliable, clean energy to grow their own business operations.

NextEra has a FactSet rating of “Buy”, yields 2.9%, and has a 3-year beta of 0.82. It is recommended Buy up to $80 a share.

Sempra

Sempra (NYSE: SRE), an energy infrastructure company, operates through three main segments: Sempra California, Sempra Texas Utilities, and Sempra Infrastructure. Sempra California delivers electricity to around 3.6 million people and natural gas to 3.3 million in San Diego County. Sempra Texas Utilities manages a regulated electricity network with extensive transmission and distribution systems, including 18,298 miles of transmission lines and 125,116 miles of overhead and underground lines. Sempra Infrastructure focuses on developing and managing energy infrastructure projects to support energy transitions in North America and globally. Founded in 1996 and headquartered in San Diego, California, the company was previously known as Sempra Energy until May 2023.

Sempra management recently discussed the view that the industry is experiencing a super cycle of growth, and they believe Sempra’s strategy and portfolio are well-positioned to benefit from current trends. In addition to the long-term demand from reshoring and electrification of transportation, artificial intelligence and data centers are driving new growth in digital infrastructure with demand estimates tripling from 2.5% of total U.S. electric consumption to 7.5% by 2030. In response, Sempra is spending significant capex on T&D to support data center growth in Texas.

Sempra has a FactSet rating of “Strong Buy”, yields 3.3%, and has a 3-year beta of 0.68. It is a recommended Buy up to $84 a share.

Companies Meeting Rapier’s Income Accelerator Criteria

Criteria for inclusion in the Income Accelerator portfolio include:

• The company must pay dividends
• The company must have a beta relative below 1.30
• The company must be well regarded by analysts according to two different metrics
• The company must have option premiums that can achieve the desirable return metrics
• The company must meet a valuation criterion

In addition to the FactSet score mentioned earlier, the Equity Summary Score (ESS) is considered. The ESS provides a consolidated view of the ratings from several independent research providers on Fidelity.com. Historically, the maximum number of providers has been between 10 and 12. The score is part of a quantitative factor model for institutional investors. In contrast, FactSet is an aggregation of analysts for retail investors.

The valuation metric is the S&P Global Market Intelligence (GMI) Valuation. This is an independent rating that evaluates each company against its peers in several categories, including cash flow and book value metrics. The GMI scale is:

• 81-100 Very undervalued
• 61-80 Undervalued
• 41-60 Medium valuation
• 21-40 Overvalued
• 1-20 Highly overvalued

Income Accelerator holdings are selected from the “Very undervalued” and “Undervalued” categories. Here are two companies that meet those criteria, along with the recommended option pairing to achieve the desired return metrics.

Vistra Corp.

Vistra Corp. (NYSE: VST) is an integrated retail electricity and power generation company, serving around 5 million customers in the U.S. and D.C. The company operates through six segments: Retail, Texas, East, West, Sunset, and Asset Closure, with a generation capacity of approximately 41,000 megawatts. It provides electricity and natural gas, engages in energy generation, and manages fuel logistics. Its energy portfolio includes natural gas, nuclear, coal, solar, and battery storage facilities. Founded in 1882, the company was renamed Vistra Corp. in 2020 and is headquartered in Irving, Texas.

Vistra projects substantial growth in power demand, driven by factors such as the potential buildout of data centers and other emerging sources of electricity demand. The company recently cited third-party research indicating that data center-related activity alone could contribute around 35 gigawatts (GW) of additional power demand by 2030.

However, the company also sees multiple other potential drivers of demand growth in the geographies they serve, including:

• Continued reshoring of industrial activity, as evidenced by multiple large chip manufacturing site buildouts, partly due to the CHIPS Act.
• Increased electrification of commercial, industrial, and residential loads across the country, with an expectation of approximately 20 GW of additional power demand in West Texas by 2030.
• Strong population growth, particularly in Texas, which has been steady at 1.5% to 2% per year.

With these drivers, the potential outcome for power demand growth is skewing higher, albeit with a wider range of possibilities. The company also believes it is well-positioned to benefit from the Inflation Reduction Act, which will continue to incentivize wind, solar, and battery resources, and require gas fire generation to back up those intermittent sources

Here is the recommended trade.

VST Trade Parameters

Security	Vistra
Ticker	VST
Sector	Utilities
Security Type	Common Stock
Price	$91.72
Annual Dividend	$0.87
Yield	0.9%
5-yr Beta	1.22
ESS	Bullish
FactSet Score	Strong Buy
GMI Score	72 (Undervalued)
Call Expiration	17-Jan-25
Call Strike	$105.00
Option Symbol	VST250117C105
Call Premium	$11.00
Net Entry	$80.72
Cost Per Contract	$8,072.00
Duration (days)	186
Dividend by Expiration	$0.44
Call yield	12.0%
Annualized Call Yield	23.5%
Annualized Total Yield	24.5%
Profit if Called	30.8%
Annualized Profit if Called	60.4%

Here’s the trade summary. For each contract:

• Buy 100 units of Vistra

and

• “Sell to Open” January 17, 2025 $105 call option

Option Symbol: VST250117C105

Limit Order Price: Net purchase price of no more than $80.72 ($8,072 per contract) — limit order

If you don’t own shares already, for each contract tell your broker:

I’d like to enter a buy-write order on Vistra. Specifically, I want to buy 100 shares of VST and sell to open the January 17, 2025 $105 call option for a net purchase price of $80.72 per share or less.

You may prefer to trade Vistra as a cash-covered put. With this approach, you sell a cash-covered put that is “out of the money.” This means that the strike price is below the current price and therefore less likely to be assigned. It is “cash-covered” because you need to have sufficient cash in your brokerage account to purchase shares in case you are assigned. You “double-dip” on the returns on this money, because while you should currently earn ~5% from your brokerage money market account, this money is also used to secure the put, for which you will receive a premium.

On a cash-covered put, I look for an annualized yield of 10% or more with an assignment risk of less than 40%. As expiration approaches, if the put is in danger of getting assigned (and presuming that’s not what we want), we can roll it forward, collecting additional credits while pushing the expiration further into the future. A roll involves buying back the put you sold while simultaneously selling a new put for a higher price at a more distant expiration date.

Vistra has many attractive put options. I would recommend the January 17, 2025 put with a strike price of $72.50 and a current bid of $5.60 a share. This gives an annualized return on the money you risked of 16.4% (plus another ~5% from your brokerage money market account) and a calculated assignment risk of 21%. If you are assigned, it will be at a total discount of 27.1% from the current price (which includes the put premium).

If you want to trade the put:

• “Sell to Open” January 17, 2025 $72.50 put option

Option Symbol: VST250117P72.5

Limit Order Price: Net selling price of no less than $5.60 ($560 per contract) — limit order

If you don’t own shares already, for each contract tell your broker:

I’d like to sell a cash-covered put on Vistra. Specifically, I want to sell to open the January 17, 2025 $72.50 put option for a net price of $5.60 per share or more.

NRG Energy

NRG Energy, Inc. (NYSE: NRG) operates the second-largest business-to-business electricity and largest natural gas retail platform in North America. As data centers ramp up their capacity and energy requirements, NRG is well-positioned to increase its electric and natural gas sales volumes to these customers through its business platform. NRG can provide tailored energy management solutions, help stabilize energy costs, and support data centers’ sustainability goals.

NRG owns a portfolio of 21 sites spanning 21,000 acres of land within competitive electricity markets. These sites offer valuable attributes such as grid interconnection, access to water, and proximity to long-haul fiber networks, making them prime locations for data center development or co-location opportunities. NRG has established a dedicated team to maximize the value of these sites, either by attracting data centers as tenants or potentially developing new generation capacity to serve the growing data center load.

Furthermore, the anticipated substantial growth in data center demand, along with other factors like electrification and onshoring of industrial activity, is expected to drive a significant increase in overall power demand. NRG’s diversified generation portfolio, particularly in the Texas market, positions the company to capture significant margin upside as power prices rise in response to this demand growth.

Here is the recommended trade.

NRG Trade Parameters

Security	NRG Energy
Ticker	NRG
Sector	Utilities
Security Type	Common Stock
Price	$79.42
Annual Dividend	$1.63
Yield	2.1%
5-yr Beta	1.15
ESS	Bullish
FactSet Score	Buy
GMI Score	90 (Very undervalued)
Call Expiration	17-Jan-25
Call Strike	$90.00
Option Symbol	NRG250117C90
Call Premium	$6.10
Net Entry	$73.32
Cost Per Contract	$7,332.00
Duration (days)	186
Dividend by Expiration	$0.83
Call yield	7.7%
Annualized Call Yield	15.1%
Annualized Total Yield	17.1%
Profit if Called	24.2%
Annualized Profit if Called	47.4%

Here’s the trade summary. For each contract:

• Buy 100 units of NRG Energy

and

• “Sell to Open” January 17, 2025 $90 call option

Option Symbol: NRG250117C90

Limit Order Price: Net purchase price of no more than $73.32 ($7,332 per contract) — limit order

If you don’t own shares already, for each contract tell your broker:

I’d like to enter a buy-write order on NRG Energy. Specifically, I want to buy 100 shares of NRG and sell to open the January 17, 2025 $90 call option for a net purchase price of $73.32 per share or less.

If you prefer to trade NRG as a put, I recommend the January 17, 2025 put with a strike price of $75.00 and a current bid of $6.60 a share. This gives an annualized return on the money you risked of 18.9% and a calculated assignment risk of 35%. If you are assigned, it will be at a total discount of 13.9% from the current price (which includes the put premium).

If you want to trade the put:

• “Sell to Open” January 17, 2025 $75.00 put option

Option Symbol: NRG250117P75

Limit Order Price: Net selling price of no less than $6.60 ($660 per contract) — limit order

If you don’t own shares already, for each contract tell your broker:

I’d like to sell a cash-covered put on NRG Energy. Specifically, I want to sell to open the January 17, 2025 $75.00 put option for a net price of $6.60 per share or more.

Companies Meeting Income Forecaster Criteria

For Income Forecaster, the following metrics are considered:

• Cash flow growth
• Return on Equity
• Dividend yield
• S&P Global Market Intelligence (GMI) Financial Health

Cash flow growth and ROE must meet certain thresholds, and the dividend yield must be at least 7.5%.

The financial health metric combines several fundamental data elements to present an overall assessment of a company’s valuation, quality, growth stability, and financial health in relation to other firms in the same sector. Companies with low GMI financial health scores are eliminated from consideration.

We are seeking companies that have sustainable 7.5% yields, and that have 30% upside potential.

The following two companies pass the criteria for inclusion in the Income Forecaster portfolio. Some Income Forecaster members have already had the opportunity to earn a 61% return with the first one, but the indicators are still positive.

Energy Transfer LP

Energy Transfer LP (NYSE: ET) is a major energy company that provides a wide range of services related to the transportation, storage, and marketing of natural gas, natural gas liquids (NGLs), crude oil, and refined petroleum products. Its extensive asset portfolio includes interstate natural gas pipelines spanning approximately 20,090 miles, natural gas gathering and processing facilities in multiple states, NGL pipelines and fractionation facilities, crude oil trunk and gathering pipelines totaling around 14,500 miles, as well as terminalling and storage assets for NGLs and refined products.

Originally founded in 1996 and headquartered in Dallas, Texas, the company plays a crucial role in the transportation and marketing of various energy commodities across multiple states. On its most recent earnings call, management noted the growth of data centers, especially in Texas, and commented on its potential to drive natural gas fire generation. The company expects this to drive growth in natural gas demand by billions of cubic feet per day and is currently looking at laying a pipeline to a large chip manufacturer in Texas.

ET Trade Parameters

Ticker	ET
Security	Energy Transfer LP
Security Type	Limited Partnership
Sector	Energy
Price	$16.33
Yield	7.7%
Sentiment	Bullish
GMI Financial Health	Medium
Buy Limit	$22.00
Implied Upside	34.7%

Enbridge, Inc.

Enbridge Inc. (NYSE: ENB) is an energy infrastructure company with operations spanning five business segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services.

The Liquids Pipelines segment operates a network of pipelines and terminals that transport various grades of crude oil and other liquid hydrocarbons across Canada and the United States.

The Gas Transmission and Midstream segment is focused on natural gas pipelines, gathering systems, and processing facilities in Canada and the U.S.

The Gas Distribution and Storage segment comprises natural gas utility operations serving residential, commercial, and industrial customers in Ontario, as well as natural gas distribution activities in Quebec. The Renewable Power Generation segment owns and operates power generation assets such as wind, solar, geothermal, waste heat recovery, and transmission assets across North America.

The Energy Services segment provides physical commodity marketing and logistics services to refiners, producers, and other customers in Canada and the United States. Originally founded in 1949 and headquartered in Calgary, Canada, Enbridge Inc. has become a diversified energy infrastructure giant with extensive operations across the oil and gas pipeline, renewable power, and energy marketing businesses.

Enbridge anticipates rising natural gas demand to fuel LNG terminals and power the growth of data centers and generative AI, which will significantly increase power generation needs. The new power generation will be a mix of natural gas and renewables. Enbridge is well-equipped to meet this demand with its extensive network of assets connected to key supply basins, offering reliable power solutions across North America. The company expects the trend of serving data centers to grow over time and is prepared to support customers through its integrated infrastructure network.

ENB Trade Parameters

Ticker	ENB
Security	Enbridge, Inc.
Security Type	Common Stock
Sector	Energy
Price	$35.89
Yield	7.6%
Sentiment	Bullish
GMI Financial Health	Medium
Buy Limit	$47.00
Implied Upside	31.0%