Stay On The Revenue Side Of AI

Core Insights - Companies across various sectors are attempting to capitalize on the excitement surrounding AI, with the term "AI" appearing frequently in conference calls, indicating a trend that investors need to scrutinize closely [1] - The article suggests that many AI products may struggle with monetization, similar to the challenges faced by Zoom Communications post-pandemic, despite having a strong platform [2][4] - A distinction is made between companies creating AI products and those providing foundational infrastructure for AI, with the latter being referred to as the "revenue side of AI" [5] Investment Strategies - Investors are advised to focus on the revenue side of AI and maintain reasonable valuations to avoid getting caught in market hype [6] - The article highlights that independent power producers (IPPs) and companies like GE Vernova (GEV) have seen significant stock price increases, with GEV up approximately 389.57% [7][10] Market Dynamics - The energy sector, particularly nuclear energy, is experiencing a boom due to its perceived reliability in supporting AI infrastructure [9] - The latest PJM auction results indicate increased prices, which are expected to bolster earnings for independent power producers [11] Growth Projections - Regulated electric utilities are positioned for long-term earnings growth of 6%-9% annually, benefiting from increased electricity demand and infrastructure investments [26][29] - The article notes that while the S&P may show higher nominal growth, regulated utilities are less cyclical and thus provide more stable growth [28] Valuation Considerations - Electric utilities are currently trading at a discount compared to the broader market, presenting a potential investment opportunity [30] - The article lists forward P/E ratios for various companies, indicating that regulated utilities have lower valuations compared to high-growth AI stocks [27][31]