Morningstar's Dave Sekera singled out two utilities stocks he says are still somewhat undervalued compared with Morningstar's fair value estimate.
Utilities stocks have been a red-hot play off the artificial intelligence boom, with AI leading to the need for much power. The Vanguard Utilities ETF, for instance, has soared nearly 21% year-to-date, more than the S & P 500's 18%. But the sector has now run too far, according to Morningstar's Dave Sekera. He said Morningstar recently changed its recommendation for the utilities sector to an underweight rating from an overweight one at the start of the year.
"Of course, artificial intelligence chips require multiple times more power than just traditional chips, but that's already priced into those stocks at this point," he said. At this point, these stocks are already up around 21% year-to-date, with the sector trading at an 8% premium over the fair value estimate that Morningstar gave it, Sekera said.
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