With the announcement of the "Stargate" project, US President Donald Trump has triggered a new dimension of euphoria surrounding artificial intelligence (AI). Chatbot specialist OpenAI, together with its partners Oracle and Softbank, is planning to invest around USD 0.5 trillion in data centers. However, it is not only the constantly acclaimed chip manufacturers that benefit from such high expenditure on expanding the AI infrastructure; energy suppliers also benefit from this development. The reason for this is relatively simple: AI is a real power guzzler. According to the experts at McKinsey, the electricity demand for data centers in the USA is expected to reach 606 terawatt hours (TWh) by 2030, a huge increase compared to 2023 with 147 TWh. In total, this would represent 11.7% of total US electricity demand. This upcoming supply supercycle is good news for electricity retailer and generator Vistra, which supplies electricity to customers from California in the West to Maine on the East Coast.
Vistra is broadly positioned: Among other things, the company has four nuclear power plants that generate more than 6,400 MW of carbon-free electricity to supply 3.2 million US households. The Texas-based company also owns the second-largest energy storage capacity in the country at around 1,020 MW, including one of the world's largest battery storage facilities and a growing portfolio of solar plants. In addition to nuclear and solar, Vistra also relies on natural gas and coal. Around 5 million private, business and industrial customers currently use Vistra's electricity. All in all, the company has a capacity of around 41,000 MW, which is enough to supply 20 million households with electricity.
The fact that business is currently running at full speed can be seen in the latest interim report. The company reported an adjusted earnings per share of USD 5.40 for the quarter ended September 30, which was well above analysts' average estimate of USD 1.25. Sales increased by 53.9% year-on-year to USD 6.29 billion, also clearly exceeding Wall Street's expectations of USD 5.01 billion. "I am proud of another strong quarter of performance from the Vistra team," commented CEO Jim Burke on the good results.
The outlook for the future is also increasingly optimistic. The Executive Board no longer expects an operating profit of just USD 4.8 billion for 2024, but is now targeting a range of USD 5.0 to USD 5.2 billion. This corresponds to an increase of around a quarter. For 2025, Vistra then expects further significant growth to USD 5.5 to 6.1 billion. While the Group was still in the red in 2021 and 2022, the result turned positive in 2023. For the past year, the analyst consensus expects earnings per share to increase by 63%, and then by a further 23% per year in 2025 and 2026.
Vistra's good operating performance and promising prospects led to the share price more than tripling last year. The start to 2025 was also "electrifying" and the S&P 500 share initially stormed from record to record. However, the fact that the energy supplier is also susceptible to a correction after this rally has become apparent in recent days. The share price fell by more than a quarter at the beginning of the week. The reason for the sharp setback was news about the Chinese AI start-up DeepSeek, which has developed AI models that are just as powerful as those from Silicon Valley, but require less power. This in turn could call projects such as the Stargate mentioned at the beginning into question.
Price setbacks, even if they are as massive as at the beginning of the week, are no problem for the new barrier reverse convertibles on Vistra. The two new soft-callable BRCs have a comfortable risk buffer of 51% right from the start. The products are also equipped with double-digit percentage coupons. The CHF variant offers a maximum return of 13% p.a., while the USD paper offers a maximum return of 18% p.a. Unlike the classic variant, the interest payment is not guaranteed without further ado. In order to receive the coupon pro rata, the Vistra share must be above the coupon trigger level on the quarterly observation dates. However, this hurdle is not particularly demanding, as the threshold is 50% of the initial level. If the coupon payment is nevertheless not made on a key date, it is not lost at the same time. Due to the memory function, the payment can be made up for if the underlying instrument is quoted above the coupon trigger level again on one of the following observation dates. If the barrier is breached, the final fixing determines the return. If Vistra is then below the strike level, losses may be incurred. If, on the other hand, the security is quoted at or above the strike level at maturity, Leonteq will repay the full nominal amount.
In order for the products to achieve the maximum yield within the maximum term of one year, no price increases are required, only the barrier must remain intact. The term can be shortened due to the built-in soft callable function. Every three months, but at the earliest after 6 months, the issuer of both BRCs has the right to early redemption at 100%.
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