This Utility Stock Could Be the Next Big AI Winner

Lots of us want to invest in artificial intelligence (AI), and a common way to do so is via companies that are themselves investing in AI. You might focus on the "hyperscalers" -- big companies such as Meta Platforms that are plowing many billions into data centers and other AI technology. Or you might invest in companies such as Applied Digital, which is contracting to build data centers. But some are worried that Meta is spending too much too soon, and Applied Digital's valuation is quite steep.

So look instead at NextEra Energy (NYSE: NEE) -- because there are multiple ways to invest in the AI boom, and many energy companies are heavily involved in AI these days. NextEra is one of the biggest electric companies in North America, and it's generating its power from a variety of sources: natural gas, nuclear, solar, wind, and more.

Image source: Getty Images.

The stock's returns have been a bit bumpy over the years, but many expect a strong performance in the years to come. Check out its trailing returns:

Data source: Morningstar.

What does all this have to do with AI? Well, NextEra has inked deals with various companies -- including Alphabet and Meta Platforms -- to help power data centers, store power, and accelerate nuclear energy development in the U.S.

And AI is poised to grow powerfully: Nvidia CEO Jensen Huang has estimated that spending on AI infrastructure will be between $3 trillion and $4 trillion by the end of the decade -- up from around $600 billion in 2025. All that infrastructure will need a lot of energy.

NextEra's stock isn't exactly cheap, but it's reasonably to attractively priced for those who plan to hang on for a long time. Its recent forward price-to-earnings (P/E) ratio of 21 is a bit below its five-year average of 23, and its price-to-sales ratio, recently around 6.6, is roughly on par with its five-year ratio.

NextEra recently sported a market cap of $182 billion -- making it the top dog in the utilities sector. It's a dividend-paying stock, too, recently with a dividend yield of 2.6%. The payout has been growing at a respectable clip, too -- recently offering an annual total of $2.27 per share, up from $1.87 in 2023 and $1.25 in 2019.

So give this compelling company some consideration for your long-term portfolio. Remember that there are other promising energy stocks out there, too.

Selena Maranjian has positions in Alphabet, Meta Platforms, NextEra Energy, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, NextEra Energy, and Nvidia. The Motley Fool has a disclosure policy.