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The demand to feed the engines of artificial intelligence has helped vault shares of one of the largest US power producers, Vistra<\/a> Corp., higher even than Wall Street darling Nvidia<\/a> Corp.\u00a0<\/p>\n Investors,\u00a0including<\/a>\u00a0Daniel Loeb, the billionaire founder of Third Point LLC, have been snapping up Vistra stock in a bet that the massive boom in demand \u2014 partly fueled by power-sucking AI data centers \u2014 will only grow. That\u2019s spurred shares to a more than 300% gain over the past 12 months, making the Texas-based firm the best performer in the S&P 500 Index \u2014 a benchmark it joined less than a month ago. Peers trailed, with utility stocks in the index returning about 10% over the same period.\u00a0<\/p>\n \u201cPower demand is extremely strong, and it\u2019s being driven by the data center trade,\u201d but Vistra\u2019s mix of gas and nuclear power plants make it \u201ca unicorn,\u201d according to Guggenheim\u2019s Shahriar Pourreza who assigned the stock its highest price target on Wall Street at $133.\u00a0<\/p>\n After hitting an all-time high earlier in the week, shares sold off on Friday as Vistra detailed plans to add natural gas capacity in Texas. Investors are concerned this could be \u201cthe tip of an oversupply iceberg,\u201d Pourreza wrote in a note to clients, but he views the changes as \u201csomewhat modest.\u201d\u00a0<\/p>\n An array<\/a>\u00a0of utility companies are expected to benefit from the AI boom with data center power demand poised to more than double by 2030, according to Goldman Sachs\u2019 estimates. But Vistra\u2019s position as one of the few public independent power producers \u2014 a status that means it sells electricity at market prices, unlike regulated utilities \u2014 has left it in a league of its own and buoyed shares.\u00a0<\/p>\n As Vistra is a direct participant in the market, \u201cthe clearest investment thesis is that wholesale power prices are going to increase,\u201d Thomas Meric, an analyst with Janney Montgomery Scott, said in an interview.\u00a0<\/p>\n Vistra\u2019s roles as a big player in the surging Texas power market and \u2014 following the more than $6 billion acquisition of Energy Harbor Corp. \u2014 as a major owner of nuclear generation capacity are helping lure in investors. With the company\u2019s nuclear fleet eligible for power-generation tax credits from the Inflation Reduction Act, it could also attract pacts from major AI players.<\/p>\n Data centers are looking for round-the-clock clean power, and \u201cnuclear plants are a very strong avenue for that,\u201d Guggenheim\u2019s Pourreza said. Investors are anticipating the company will be able to contract its plants directly with data centers, similar to an\u00a0energy-matching agreement<\/a>\u00a0between Constellation Energy<\/a> Corp. and Microsoft<\/a> Corp, he added.\u00a0<\/p>\n Other key future catalysts would be the company\u2019s first earnings-per-share guidance and a longer-term outlook from the company, Pourreza said.<\/p>\n Even after the run, Vistra\u2019s stock screens relatively inexpensive compared to other ways to play the AI and data-center booms, according to Janney\u2019s Meric. The company trades around 17 times the next year\u2019s earnings, compared to Nvidia\u2019s multiple of 37.\u00a0<\/strong>Wall Street analysts are overwhelmingly positive, with 10 of the 11 surveyed by Bloomberg giving the shares a buy-equivalent rating.\u00a0<\/p>\n Morningstar analyst Travis Miller, who has the lone sell recommendation on the stock, said the trends feeding the rally could falter. For one thing, growing renewable generation could squeeze legacy power producers in Texas.<\/p>\n \u201cThe market has gotten a little too overexcited,\u201d Miller said.\u00a0<\/strong>Current analyst price targets suggest a cool down may be ahead with an average of $108 implying a 12% gain over the next 12 months, and even Pourreza\u2019s $133 Street high suggests a slower pace of gains.<\/p>\n But for adherents, including activist investor Loeb, the expansion of renewable energy is another reason to buy in. The intermittent nature of wind and solar power supports the case for legislation favoring natural gas plants, like Vistra\u2019s, that are available in a pinch, he\u00a0wrote<\/a>\u00a0<\/strong>in an April letter.\u00a0<\/p>\n Vistra was one of his hedge fund\u2019s top five winners in the first quarter, and Loeb cited the power demand from data centers and electric vehicles as another reason for long-term confidence.\u00a0<\/p>\n \u201cVistra is in the pole position to capitalize on these trends,\u201d he wrote. \u201cWe expect the discount applied to their assets to continue to narrow as their business becomes increasingly essential to serving domestic power demand.\u201d<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n