OpenAI alone plans to spend $1.4 trillion in the coming years. But the Sam Altman-led company, which became the world’s most valuable startup in October, is generating far less revenue than its operating costs. It expects to burn $115 billion through 2029 before generating cash in 2030, The Information reported in September.Here’s a look at the key trends to watch while navigating through these choppy waters.Of course, there are still plenty of reasons for optimism. The tech giants that account for much of ...

Core Viewpoint - The AI capital expenditure (capex) is experiencing significant growth, presenting substantial investment opportunities, particularly in companies that provide the infrastructure for AI rather than the hyperscalers themselves [1][4]. Group 1: AI Capex Growth - AI capex spending is accelerating, indicating that the infrastructure build-out for AI has not yet peaked [1]. - The hyperscalers are engaged in a "winner-takes-all" competition, leading to unprecedented capital expenditures on infrastructure [3]. Group 2: Investment Strategy - The "picks and shovels" investment strategy focuses on companies that supply the necessary infrastructure for AI, rather than investing directly in the hyperscalers [2][4]. - Companies involved in the AI infrastructure are expected to benefit from a sustained flow of cash due to the hyperscalers' spending [3]. Group 3: Beneficiary Sectors - Chipmakers, such as NVIDIA and Broadcom, are key beneficiaries by providing AI processing power [6]. - Energy producers, including NextEra Energy and Constellation Energy, are essential for powering AI data centers [6]. - Commodities and materials suppliers, particularly those providing copper and wiring, are critical for connecting data centers [6]. - Infrastructure builders, like Vertiv Holdings and EMCOR Group, are vital for constructing data centers and cooling systems [6].

Core Themes - Utilities stocks are performing well in 2025, with the Utilities Select Sector SPDR Fund (XLU) up approximately 9.3% and nearing its all-time high, offering a total return of about 12% including a dividend yield of 2.76% [1][2] - Utilities are considered defensive stocks due to the constant demand for power, regardless of economic conditions, and a regulatory framework that supports both consumers and companies [2][16] - The demand for utilities is expected to remain strong even if the economy improves, making utilities stocks a viable option for a diversified portfolio [3][16] Constellation Energy - Constellation Energy's stock forecast indicates a 12-month price target of $285.79, with a current price of $292.40, reflecting a moderate buy rating based on 15 analyst ratings [4] - The company reported revenue of $6.79 billion, exceeding analyst expectations by 24.7%, although earnings per share of $2.14 fell short of the $2.22 forecast [5] - The stock has increased by 18% since the earnings report, driven by the announcement of long-term agreements to deliver nuclear power for data centers [6][7] NRG Energy - NRG Energy's stock forecast shows a 12-month price target of $140.75, with a current price of $159.63, indicating a moderate buy rating based on 8 analyst ratings [9] - The company is benefiting from data center growth and has a diverse power portfolio, including coal, oil, solar, and battery storage [9][10] - NRG's stock has risen over 77% as of May 20, 2025, and offers a dividend yield of 1.1%, although it is currently considered overbought [11] Exelon - Exelon's stock forecast suggests a 12-month price target of $47.30, with a current price of $44.26, and a hold rating based on 10 analyst ratings [12] - The stock has declined about 6% in May due to a $173 million settlement related to misleading investors about bribery accusations, overshadowing a strong earnings report [13][14] - Despite lower year-to-date gains compared to peers, Exelon offers the highest dividend yield at 3.6% and may be well-positioned for growth in the upcoming quarters [14][16] Overall Market Outlook - The utilities sector is expected to outperform in a volatile market, with companies like Constellation Energy, NRG Energy, and Exelon providing compelling investment opportunities [16] - The sector is benefiting from structural demand and may serve as both a defensive play and a source of meaningful returns in the near future [16]