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Utility stocks (XLU) are rebounding Tuesday morning following yesterday's market downturn triggered by Chinese artificial intelligence (AI) startup DeepSeek. Jefferies managing director of US power, utilities, and clean energy research Paul Zimbardo joins Morning Brief to analyze the sector's outlook.
Zimbardo cautions that energy names aren't out of the woods yet, describing the DeepSeek situation as "the first wrinkle" in the yearlong AI trade. He explains that investors' previous bullish stance on utilities stemmed from expectations that AI's power demands would drive "significantly higher power contracts."
"Hopefully we can ... resume some of that upward trend, but this really does kind of cast some uncertainty into that thesis," he notes.
For investors seeking opportunities in the sector, Zimbardo recommends two picks: PPL Corporation (PPL) for traditional utility exposure and Talen Energy Corporation (TLN) in the power company category.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
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This post was written by Angel Smith