It’s no secret by now that investors & market participants have been obsessing over Artificial Intelligence, or A.I.
At any given time you put on a financial news channel it seems that someone is talking about how to harness its power, or there is a commercial on discussing the endless possibilities of how it will benefit humanity & our future.
There are a number of ETFs out there now whose holdings are dedicated to providing exposure to this phenomena, but most are primarily focused on the technologies & hardware that powers these machines, which tends to mostly be technology company exposure.
As markets are off all-time highs, I thought it would be interesting to look into companies that would provide a more defensive approach to providing exposure to the A.I. revolution.
The two main sectors of focus will be Real Estate & Utilities.
The article below will list out the largest publicly traded players in each space with a list of some of their fundamentals that might be taken into consideration when structuring a synthetic ETF in your portfolio, but there will not be any commentary on the quality of the numbers, that is going to be subjective for each individual market participant.
As always, this is not meant to be taken as financial advice, and always do your own due diligence before making any types of decisions with the information provided below.
The Real Estate Housing A.I. & Data Centers
While most of the ETFs I reviewed were focused on the hardware side of how A.I. is hosted, the real estate that houses the machinery is also an important part of the operation.
For this, we look to data centers & the stocks behind the two largest data center holders in the United States.
Digital Realty Trust Inc. DLR Stock
The first one is Digital Realty Trust Inc., who trades under the ticker DLR & owns the most data centers in the United States.
Here is a snapshot at some of DLR stock’s fundamentals (all data came from Fidelity, Yahoo Finance & StockCharts.com):
P/E: 47.1
P/B: 2.47
Market Cap: $45.56B
Beta: 0.55
% Institutional Ownership: 99.86%
Dividend Yield: 3.35%
Payout Ratio: 56.16
Equinix Inc. EQIX Stock
Next, we look at Equinix Inc., who trades under the ticker EQIX.
EQIX owns the second largest number of data centers in the United States & provides additional exposure to the real estate element of data centers & artificial intelligence.
P/E: 75.3
P/B: 6.06
Market Cap: $75.81B
Beta: 0.60
% Institutional Ownership: 94.9%
Dividend Yield: 2.13%
Payout Ratio: 177.2
The Utilities That Power A.I. & The Major Data Centers In The U.S.
Dominion Energy Inc. D Stock
Dominion Energy Inc. stock trades under the ticker D & is one of the main energy providers in Virginia.
Northern Virginia is one of the largest data center hubs in the United States, making them worth considering during this exercise.
P/E: 19.7
P/B: 1.61
Market Cap: $41.5B
Beta: 0.61
% Institutional Ownership: 73.1%
Dividend Yield: 5.39%
Payout Ratio: 172.5%
PG&E Corp. PCG Stock
PG&E Corp. trades under the ticker PCG & provides utilities in the Northern California region, which is also a major region for data centers in the United States.
P/E: 15.9
P/B: 1.45
Market Cap: $36.25B
Beta: 1.32
% Institutional Ownership: 95.52%
Dividend Yield: 0.24%
Payout Ratio: 0.95%
Southern Co. SO Stock
Southern Co. (The) stock trades under the ticker SO & provides utilities in the Atlanta, Georgia area, which also happens to house a lot of data center activity in the United States.
P/E: 19.3
P/B: 2.45
Market Cap: $77.01B
Beta: 0.49
% Institutional Ownership: 64.1%
Dividend Yield: 3.97%
Payout Ratio: 89.36%
Portland General Electric Co. POR Stock
Portland General Electric Co. stock trades under the ticker POR & is a utilities provider in the Portland, Oregon area, which also is a major hub in the U.S. for data centers.
P/E: 17.5
P/B: 1.29
Market Cap: $4.27B
Beta: 0.57
% Institutional Ownership: 88.03%
Dividend Yield: 4.5%
Payout Ratio: 70.59%
Consolidated Edison Inc. ED Stock
Consolidated Edison Inc. stock trades under the ticker ED & is a utilities provider in the greater NY/NJ area, which is well known for having a lot of data center activity in the U.S.
P/E: 12.3
P/B: 1.49
Market Cap: $31.49B
Beta: 0.35
% Institutional Ownership: 66.16%
Dividend Yield: 3.64%
Payout Ratio: 79.94%
Public Service Enterprise Group Inc. PEG Stock
Public Service Enterprise Group Inc. stock trades under the the ticker PEG & is a utilities provider in the New Jersey region of the United States.
New Jersey is home to a large number of data centers making them worth considering in this exercise.
P/E: 13
P/B: 2.16
Market Cap: $33.51B
Beta: 0.57
% Institutional Ownership: 73.18%
Dividend Yield: 3.57%
Payout Ratio: 52.01%
First Energy Corp. FE Stock
First Energy Corp. stock trades under the ticker FE & is also a provider of utilities in the greater NY/NJ area of the United States.
P/E: 19.3
P/B: 2.12
Market Cap: $22.14B
Beta: 0.48
% Institutional Ownership: 82.87%
Dividend Yield: 4.42%
Payout Ratio: 80.61%
Edison International EIX Stock
Edison International stock trades under the ticker EIX & is a provider of utilities in Southern California, where there are also a high concentration of data centers.
P/E: 22.2
P/B: 1.97
Market Cap: $27.27B
Beta: 0.96
% Institutional Ownership: 88.23%
Dividend Yield: 4.4%
Payout Ratio: 74.6%
Tying It All Together
The real estate & utility companies above offer low-beta exposure to the A.I. stock craze & can be combined to create a synthetic ETF structure in your portfolio, which some market participants may find beneficial at a time where most of the major indexes are just below their all-time highs (see this past weekend’s market review note).
While each has unique attributes, they all are related to the data centers that power A.I. & or the publicly traded utilities providers in the top 10 regions of the United States that are homes to data centers.
Here is more information on U.S. data centers, including the regional data that was used to find the utility companies listed above.
As mentioned above, none of the fundamentals listed above were given with any commentary, please do your own research if you are going to undertake this exercise, as nothing above was financial advice.
*** I DO NOT OWN SHARES OR OPTIONS CONTRACT POSITIONS IN DLR, EQIX, D, PCG, SO, POR, ED, PEG, FE or EIX AT THE TIME OF PUBLISHING THIS ARTICLE ***
*** ALL DATA LISTED ABOVE CAME FROM FIDELITY, YAHOO FINANCE & STOCKCHARTS.COM ***