This Ridiculous AI Play Is 90% Overvalued (Sell Yesterday)

Core Insights - The AI data center buildout is significantly impacting the economy, with investment in AI's computing infrastructure expected to contribute more to US economic growth than consumer spending [2] - Utility stocks are becoming increasingly attractive to investors due to rising electricity demand driven by AI, with some cities experiencing electricity price increases of over 100% since 2020 [3][4] - The Gabelli Utility Trust (GUT) offers a high yield of 9.9%, but is currently overvalued, trading at a 90.2% premium to its net asset value (NAV) [5][11] Investment Trends - The Utilities Select Sector SPDR Fund (XLU) has seen a 20% increase year-to-date, significantly outperforming its historical average annualized return of 10.9% [4][5] - GUT has outperformed XLU in the short term, but its long-term performance has been closely aligned with the index, indicating potential overvaluation [6][7] Performance Analysis - GUT's total NAV return has been slightly underperforming compared to the index over the last decade, with a 9.4% annualized return [10] - The current premium of 90.2% to NAV suggests that investors are paying significantly more than the underlying assets are worth, raising concerns about future performance [11][12] Market Dynamics - The recent surge in GUT's price is attributed to investor enthusiasm rather than the fund's management or portfolio quality, indicating a potential risk of a market correction similar to the one experienced in late 2023 [13]