Investors Pull Back on Texas Power Company as AI-Driven Energy Demand Fade

By Thea Felicity

Jun 07, 2024 02:21 PM EDT

Above-Average Temperatures In Texas Put Strain On Power Grid
SAN MARCOS, TEXAS - APRIL 17: A general view of a transmission towers in a field on April 17, 2024 in San Marcos, Texas. The Electric Reliability Council of Texas (ERCOT) have asked power generating companies to postpone scheduled maintenance to help alleviate potential setbacks as temperatures have risen to the mid 80s. Rising temperatures has the potential to lead to an increased power demand during scheduled maintenance times, creating a power emergency.
(Photo : Brandon Bell/Getty Images)

Texas-based power producer Vistra Corp. reported its steepest decline since February 2021 as investors retreat from bets on an AI-driven surge in electricity demand. According to Bloomberg, the company's stock dropped 1.6% on Friday, June 7, reversing earlier gains, and is on track for a 14% loss this week. 

This decline follows a significant rally over the past year, surpassing even Nvidia Corp.'s performance, fueled by predictions of increasing energy needs for AI data centers.

Recent actions by investors to sell off their shares for profit have contributed to a wider market decline, impacting Vistra Corp. and other power producers like Constellation Energy Corp. and companies that make related equipment. 

It takes a long time for energy consumption to increase, which is making some investors impatient as they analyze current financial performance reports, leading them to sell their stocks.

READ MORE: Vietnam Urges Apple Supplier Foxconn to Voluntarily Reduce Power Use by 30% amid Worsening Electricity Outages

Vistra Corp Power Producer

Vistra's stock surge was driven by its status as an independent power producer selling electricity at market rates and its substantial nuclear generation capacity. 

However, shares began to tumble after the company announced expansion of natural gas capacity in Texas. Analysts attributed the sell-off to interest in a Texas loan program that could lead to a surge in power generation capacity, potentially depressing prices.

Despite the recent downturn, Wall Street remains optimistic about Vistra, with 10 out of 11 analysts rating the stock a buy and an average price target suggesting a 25% increase over the next year. 

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