The AI concept stock frenzy cools down, this American electric company, which surged more than NVIDIA, plummeted

On Friday, under the AI ​​boom, the "hidden winner" Texas electricity producer Vistra plummeted by 10% at one point during the trading session, although the closing decline narrowed to nearly 6%. However, compared to the Nasdaq 100, which experienced a similar sharp drop during the day but almost recovered all losses by the closing bell, Vistra's performance was notably weak.

In fact, Vistra had just hit a historical high earlier this week. The company's expansion plans for natural gas production capacity have raised some concerns in the market, coupled with the recent trend of risk aversion in the market, leading to a halt in the stock price surge.

Vistra's stock has surged over 300% in the past 12 months, making it the best-performing stock in the S&P 500 index. Vistra only joined the S&P 500 index less than a month ago, outperforming other utility stocks (which had a return of about 10% during the same period), and even surpassing the darling of Wall Street, NVIDIA.

The main logic driving the significant rise in Vistra's stock price is the high electricity consumption in artificial intelligence data centers, with investors betting on the continuous growth in electricity demand, especially from AI data centers.

According to Goldman Sachs' estimates, the AI ​​boom is expected to more than double the electricity demand of data centers by 2030, with many utility companies expected to benefit from this trend. As one of the few publicly independent power generation companies, Vistra sells electricity at market prices, unlike regulated utility companies, which sets it apart and drives its stock price up.

Vistra holds a significant position in the electricity market in Texas, USA, and has become one of the major nuclear power generation companies after acquiring Energy Harbor for over $6 billion. These factors have attracted investors. Additionally, the company's nuclear power plants are eligible for power tax credits provided by the "Inflation Reduction Act," which may attract contracts from major AI companies.

Guggenheim analyst Shahriar Pourreza believes:

The demand for electricity is very strong, mainly driven by transactions from data centers. Vistra's combination of natural gas and nuclear power plants makes it a "unicorn." Data centers are looking for clean energy, and nuclear power is a very strong choice. Investors expect the company to be able to directly contract with data centers, similar to the agreement between Constellation Energy and Microsoft.

The sharp drop in stock price on Friday was due to investor concerns that the expansion of natural gas production may be just the tip of the iceberg of oversupply, but he believes these changes are relatively moderate.

Guggenheim's target price for Vistra is $133, the highest on Wall Street, more than 30% above Vistra's closing price on Friday Some market participants pointed out that Vistra's stock, after experiencing a surge, is still relatively cheaper compared to other AI concept stocks. Wall Street analysts generally hold a positive attitude towards it.

However, Morningstar analyst Travis Miller is an exception. He believes that the trend driving Vistra's rise may weaken. One reason is that the growing renewable energy generation may squeeze Vistra's traditional power generation. In addition, market sentiment seems a bit too excited.

Billionaire and founder of Third Point LLC, Daniel Loeb, is also heavily betting on Vistra. Loeb believes:

The expansion of renewable energy is precisely a reason to further invest in Vistra. He previously stated that the intermittent nature of wind and solar energy is beneficial for natural gas power plants like Vistra, which can provide electricity in emergencies.

The power demand from data centers and electric vehicles is another reason for his long-term confidence in Vistra.

Vistra is in a favorable position to capitalize on these trends. As the company's business becomes increasingly important for meeting domestic power needs in the United States, it is expected that the discount on its assets will continue to narrow