The utilities sector is showing strong positive trends, and this particular stock is experiencing a significant upward movement.

Utilities have long been seen as a safe investment, attracting funds looking for stability and consistent dividends amidst market fluctuations. Traditional market wisdom cautions against claiming “this time is different.” However, Nvidia’s CEO Jensen Huang suggests we are on the brink of a new industrial era driven by artificial intelligence, which demands substantial electrical power. Goldman Sachs reports that a single ChatGPT query consumes about ten times the electricity of a Google search. This context might justify a shift in perspective regarding utilities.

Historically, utilities have an inverse relationship with interest rates. If interest rates have peaked, as they likely did in the fourth quarter of 2023, and are now declining, capital may move from fixed income to stable dividend-paying stocks. This trend is evident in the inverse correlation between the U.S. 10-year yield and the Utilities Select SPDR ETF (XLU), setting the stage for a utilities rally. Although lower yields have generally boosted the broader stock market, utilities have outperformed the S&P 500 since February, as indicated by the XLU/SPY ratio.

Despite not reaching the all-time highs of 2022, utilities might be poised for growth due to lower yields and increased power demand from AI. The top-performing stocks in the electric utilities sector include Pampa Energy (PAM), Southern Company (SO), Pinnacle West Capital (PNW), NextEra Energy (NEE), and Duke Energy (DUK), with Talen Energy (TLN) also noteworthy.

Focusing on Southern Company, this utility excels in solar, coal, and natural gas production and has adeptly managed nuclear power regulations. With AI’s energy needs likely to rely on nuclear power supplemented by solar, Southern Company is well-positioned. Although trading at 21 times next year’s expected earnings, its growth prospects may justify this valuation. The company reported $3.65 in EPS for 2023, with an 11% growth forecast to $4.04 in 2024. Its recent earnings exceeded expectations by 17%, and Q3 earnings are anticipated to be $1.40. Having broken through the $80 resistance level, the stock could reach $100 in the coming quarters, offering a favorable risk-reward ratio and a 3.3% yield.

In conclusion, utilities might be aligning with tech stocks, particularly semiconductors, as we advance into this new industrial revolution, suggesting that this time could indeed be different.

– Todd Gordon, Founder of Inside Edge Capital, LLC

DISCLOSURES: Todd Gordon holds positions in SO and DUK personally and through his firm, Inside Edge Capital. The charts referenced are from MotiveWave. The opinions expressed are solely those of the CNBC Pro contributors and do not reflect the views of CNBC, NBC UNIVERSAL, or their affiliates. This content is for informational purposes only and does not constitute financial, investment, tax, or legal advice. It is general in nature and may not be suitable for your specific circumstances. Consult your financial advisor before making any financial decisions. For the full disclaimer, click here.