The S&P 500 index has surged nearly 22% this year, reflecting a strong performance across many sectors of the market. It represents a broad mix of 500 larger companies, though there are more than 500 due to companies having multiple classes of shares. This diversity means that some stocks have outperformed the index, while others have lagged behind.
This year, four standout stocks in the S&P 500 are catching investors’ eyes. Notably, only one of these is part of the well-known “Magnificent Seven.” Should investors consider buying these stocks after their significant gains?
1. Vistra Corp – Up 224%
Utility stocks, especially Vistra (NYSE: VST), have seen remarkable growth, in part due to lower interest rates that have attracted investors to dividend payers. An interesting aspect of Vistra’s success is its potential role as a “picks and shovels” stock in the AI industry, but through a distinct lens. AI development demands massive amounts of energy for data centers, and Vistra, as the largest competitive power generator in the U.S., owns four nuclear reactors following its acquisition of Energy Harbor in 2023.
2. Nvidia – Up 172%
Nvidia (NASDAQ: NVDA) hardly surprises investors who have followed its meteoric rise, as it’s frequently discussed in financial circles. As a core component in AI development, Nvidia designs essential chips that power technology from leading firms like OpenAI, Amazon, Google, and Microsoft. Analysts suggest Nvidia captures between 70% and 95% of the market share for AI semiconductors, crucial for technologies such as ChatGPT. Revenue and profits have escalated significantly since early 2023.
NVDA Revenue (Quarterly) data by YCharts.
3. Palantir Technologies – Up 153%
Palantir Technologies (NYSE: PLTR) has enjoyed substantial gains since going public in 2020, with its stock climbing nearly 370%. The company’s focus on AI enables them to help clients analyze large datasets more easily, removing the need for advanced technical skills. Palantir’s advanced platforms and applications allow users to interact with data meaningfully. The U.S. government is their largest client, securing significant contracts with the State Department and the Army.
4. Constellation Energy – Up 127%
Constellation Energy (NASDAQ: CEG) stands out as the largest carbon-free energy producer in the U.S., primarily focused on sustainable energy sources, including wind and solar. About 90% of the energy it produces is carbon-free, making it a vital part of the U.S. energy landscape. With ownership of 21 nuclear reactors across 12 sites, Constellation is positioned well for future energy demands, particularly as tech companies are projected to invest $1 trillion in data centers over the next five years.
Earlier this year, CEO Joe Dominguez noted increasing demand from industries like AI for nuclear energy, emphasizing the potential growth ahead.
Are These AI Stocks Worth Buying?
The rapid rise in stock prices has resulted in high valuations, reflected in the current price-to-earnings ratios of these companies.
NVDA PE Ratio data by YCharts.
These stocks are compelling due to their roles in AI and their potential to reshape various industries. However, investing in high-growth stocks can be risky; a slight miss in earnings can lead to significant stock declines.
For long-term investors who can withstand market fluctuations, these stocks offer potential. Among them, utility companies like Constellation and Vistra appear to be more resilient. Although expensive, they provide dividends and aren’t solely reliant on AI for their revenue, giving them stability if AI-related growth falters.
Thinking of Investing $1,000 in Nvidia?
Before making an investment in Nvidia, it’s worth noting:
The Motley Fool Stock Advisor analyst team recently highlighted their picks for the 10 best stocks to buy now, and Nvidia wasn’t included. The selected stocks are deemed likely to yield impressive returns in the near future.
For context, if you invested $1,000 in Nvidia following its recommendation on April 15, 2005, you would have transformed that into $846,108!*
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John Mackey, former CEO of Whole Foods Market, is on the board of directors for The Motley Fool. Suzanne Frey, an executive at Alphabet, also serves on the same board. Bram Berkowitz has no positions in any mentioned stocks. The Motley Fool holds positions in and recommends Alphabet, Amazon, Constellation Energy, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool also recommends short and long options on Microsoft.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
