The Power Behind Wall Street's 2024 Energy Stocks Rally: Climbing Oil Prices, Geopolitical Risks, AI Boom and More

The surge in energy stocks in 2024 isn't just due to climbing crude oil prices, which are at their highest since October. The sector's rise is also fueled by a brighter global economic outlook and its stocks' compelling value compared to the pricier S&P 500. Analysts note that strong free-cash-flow yields and better enterprise-value-to-Ebitda ratios make energy stocks attractive investments. Moreover, geopolitical risks, especially the looming threat of conflict between Israel and Iran, could push U.S. oil and gas stocks and crude prices even higher shortly.

Check out the top gainers among energy stocks:

Artificial intelligence (AI) is regarded as a significant economic force, with predictions suggesting it could contribute $15.7 trillion to the global economy by 2030. For AI to achieve its full potential, it depends heavily on two key resources: computing power and electricity. While the investment focus has largely been on computing power through semiconductors, the role of electricity is often underestimated.

Data centers, which are integral to AI operations, are projected to increase their electricity consumption from 2% to 10% of the world's total by 2030. This would require an amount of electricity comparable to the current capacity of the entire U.S. power grid. Although renewable energy will play an important role in supplying power for AI, it alone will not be sufficient to meet the forecasted demand.