NVIDIA's Stealth Dividend: Tapping into AI's Electricity Appetite

The article discusses how the AI boom is driving demand for electricity, which can benefit utilities and specifically nuclear power companies. The author suggests investing in high-yield closed-end funds (CEFs) that trade at discounts and offer 10%+ dividends. These funds can tap into the growing nuclear power market, which has bipartisan support and is being driven by tech companies such as Alphabet and Amazon. The article highlights the potential for second- and third-order benefits from AI, including improved efficiency in industries such as insurance.

The AI boom continues to show significant growth potential, but investing directly in AI stocks may not be the most efficient way to capitalize on this trend. The demand for electricity, driven by AI's voracious appetite, presents an opportunity for utilities and nuclear power companies. High-yield closed-end funds (CEFs) that focus on nuclear power and trade at discounts can offer substantial dividends and tap into this growing market.

The AI Boom and Nuclear Power

The AI revolution has transformed various sectors, including nuclear power. Tech giants like Alphabet (GOOGL) and Amazon have invested in nuclear power companies such as Kairos Power and X-Energy, respectively, to build up nuclear capacity. This investment is driven by AI's high power demand and its potential to enhance productivity and efficiency [1].

Investing in Utilities and Nuclear Power

While utilities stand to benefit from higher energy demand, the sector as a whole has been undervalued. The Utilities Select Sector SPDR Fund (XLU) has returned just 25% over the past three years, less than half the broader market's return. However, investing in a more tactical approach can yield better results. The Gabelli Utility Trust (GUT) is one such option, offering a 10.7% yield and holding firms like WEC Energy (WEC) and Constellation Energy (CEG), which are expanding nuclear power production [1].

High-Yield Closed-End Funds

High-yield CEFs offer a way to invest in nuclear power with substantial dividends. The Voya Infrastructure Industrials and Materials Fund (IDE), for example, holds key infrastructure suppliers like Siemens AG, Cisco Systems (CSCO), and Schneider Electric SE, all of which stand to gain from an AI-driven infrastructure buildout, including nuclear power. IDE trades at a 4% discount to its net asset value (NAV) and has outperformed GUT on a total NAV return basis over the last three years [1].

Conclusion

Investing in high-yield CEFs that focus on nuclear power can be a strategic way to benefit from the AI boom. These funds offer substantial dividends and can tap into the growing nuclear power market, which has bipartisan support and is being driven by tech companies. By diversifying investments beyond AI stocks, investors can capture the second- and third-order benefits of AI, such as improved efficiency in various industries.

References

[1] https://contrarianoutlook.com/this-10-payer-is-the-ai-booms-stealth-dividend/
[2] https://www.nasdaq.com/articles/10-payer-ai-booms-stealth-dividend