Hedge funds including Coatue Management and Lone Pine capital, known for their tech-centric investments, are turning their attention to utility and power companies because of their critical role in generative AI operations, according to a report by the Wall Street Journal.
Firms such as Vistra, Constellation Energy, and Talen Energy have emerged as favourite bets as they supply the electricity required for training large language models and running AI chatbots such as ChatGPT.
This AI-driven demand for electricity has propelled power companies into the spotlight. Vistra, for instance, has seen its stock price more than triple this year, making it one of the top-performing stocks in the S&P500 and a lucrative addition to hedge fund portfolios.
Coatue, led by Philippe Laffont, held stakes in Vistra and Constellation valued at $2.3bn as of September. The fund gained approximately 12% by the end of October, supported by these positions.
Lone Pine Capital meanwhile, the $17bn investment firm run by Steve Mandel, reported that investments in Vistra, Constellation, and Talen accounted for one-fifth of its 22% returns up to the end of September.
Third Point, managed by Dan Loeb, saw its flagship fund achieve a 27% return through November, largely driven by its holdings in Vistra. This success complemented its broader AI-focused investments in Amazon, Meta Platforms, and Taiwan Semiconductor Manufacturing.
While the S&P500 returned 28% through November, broad hedge-fund indexes have trailed at about 10% growth over the same period.
