Stanley Druckenmiller is one of the greatest investors of all time. As manager of Duquesne Capital Management from 1981 to 2010, Druckenmiller generated an average annual return of 30% and never had a losing year during that time. Today, Druckenmiller is no longer an active fund manager, but still manages a portfolio of his own stocks through the Duquesne Family Office. And investors are paying close attention to his moves.
That’s why investors noticed this when Druckenmiller, who was early to buy shares of Nvidia (NASDAQ: NVDA) in the fourth quarter of 2022, after ChatGPT launched, he dumped most of his stake in the AI chip leader in the first half of this year. He said at the time that the market now sees in Nvidia what he previously recognized. In an interview last week with Bloomberg, the Duquesne chief revealed that he had sold his entire stake in Nvidia.
Druckmiller admitted that selling the chip shares was a mistake, as Nvidia’s stock price has continued to rise since then. He also said he remained optimistic about artificial intelligence (AI), adding: “We are big proponents of AI over the long term, and there are still a lot of ways we are playing AI, especially the infrastructure that has been built to support the necessary force.”
The AI stock that Druckenmiller bought
While Druckenmiller has sold all 9.5 million Nvidia shares he once owned, he’s been accumulating shares of another under-the-radar AI stock. That is Vistra (NYSE: VST)and it was Duquesne’s third largest stake by market value as of the end of the second quarter at $225.7 million.
Druckenmiller first bought the shares in the third quarter of 2023, the same quarter he began reducing his Nvidia stake. Since the end of that quarter, the stock has risen 309% and is now the best performing stock on the market. S&P500 this year, having recently passed Nvidia for the title following a recent surge. Year to date, Vistra is up 252%.
Should you follow Druckenmiller to Vistra? Let’s take a look at what this unique AI game has to offer.
What is Vistra?
As Druckenmiller pointed out in the AI infrastructure quote above, energy will play an important role in AI, as it takes incredible amounts of energy to run AI data centers. That’s where Vistra comes into the picture. The Texas-based company is now the nation’s largest competitive (i.e. deregulated) power producer, with 41,000 megawatts (MW) of installed generation capacity.
It is also one of the largest nuclear power producers in the country with a capacity of 6,400 MW. After acquiring Energy Harbor earlier this year, it now has the second largest energy storage capacity in the country, with 1,020 MW.
The reason why investors are increasingly looking at Vistra as a way to capitalize on the AI boom is because energy demand from data centers is expected to roughly triple between 2023 and 2030, adding 35 gigawatts of energy demand in that time. Vistra also sees a number of other growth drivers, including the reduction in industrial activity, the construction of new semiconductor foundries as a result of the CHIPS Act and the increased need for electrification, including in the Permian Basin, where the company expects demand to increase will increase by 20 gigawatts by 2030.
That growth explains why investors believe utility stocks like Vistra offer an attractive way to gain exposure to the growth of AI.
Is Vistra a purchase?
Vistra is a utility company and is therefore still subject to most of the restrictions of a utility company. However, it has one advantage over other utilities: it operates in unregulated energy markets and supplies power at market prices, rather than at a price set by regulators. That’s the way most utilities operate, because they are regulated monopolies.
That gives the company significant upside potential if a supply shortage arises due to the growth of AI and data centers.
Despite those growth opportunities, Vistra is actually more expensive than Nvidia right now, with a price-to-earnings ratio of 100, although analysts expect profits to rise through 2025. However, energy prices are notoriously difficult to predict.
Announcements this week from Alphabet And Amazon have contributed to increasing nuclear stockpiles. They show that major technology companies are working to secure adequate sources of clean energy for their data center needs.
Vistra could fit into an AI portfolio. However, after the recent run-up, I think it would be wiser to wait for a better price to buy the stock.
Druckenmiller seems to agree with that statement. After buying the stock for three quarters in a row, he took a break in the second quarter, perhaps thinking the stock had already risen significantly.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Amazon: If you had invested $1,000 when we doubled in 2010, then you have $21,285!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $44,456!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $411,959!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 14, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions at Amazon. The Motley Fool holds positions in and recommends Alphabet, Amazon and Nvidia. The Motley Fool has a disclosure policy.
Billionaire Stanley Druckenmiller has sold out of Nvidia. He buys this AI stock instead. was originally published by The Motley Fool
