Source: Finance Association

In recent days, a Goldman Sachs recommended buying$PETROCHINA (00857.HK)$,$CNOOC (00883.HK)$The research report on raising the target price of “three barrels of oil” attracted great attention from Chinese shareholders. Actually, the rise of energy stocks in the global market this year is nothing new.

For example, in the US market, with the recent continuous rise in crude oil prices and enthusiastic discussions about “the end of AI is electricity,” energy stocks seem to have become a more brilliant “star” than technology growth stocks.

This Tuesday, the US$S&P 500 Index (.SPX.US)$It fell for the second consecutive trading day after entering April, as the market increasingly doubted whether the Federal Reserve had completely contained inflation. Eight of the 11 stocks in the index fell, but despite the overall sluggish market conditions, there was still a bright spot — rising oil prices helped energy stocks rise 1.4%.

Despite a general sell-off in the stock market, the S&P 500 Energy Select Sector SPDR Fund (XLE) once again hit a 52-week high on Tuesday.

According to a set of statistics, the energy sector is the best performing sector in the S&P 500 index so far this year. The energy sector has risen 14% so far this year, surpassing the overall S&P 500 index's increase of about 9%. Oil and gas-related stocks were also the biggest winners in the S&P 500 index last month.

“Energy stocks are catching up, and history shows they will rise further in the near future,” Nicholas Colas, co-founder of DataTrek Research, wrote in a customer note on Tuesday.

“Oil prices have stabilized, which is a necessary prerequisite for the industry to perform well. Furthermore, if there is an oil market shock caused by geopolitical tension this year, the sector will be able to act as a unique risk hedging tool.” Colas said.

Colas pointed out that between 2008 and 2014, when WTI crude oil futures prices fluctuated between $80 and $100 per barrel, XLE generally outperformed other stocks.

The secret to rising energy stocks: the sharp rise in oil prices combined with “the end of AI is electricity”!

Judging from the current fundamental background, there is no doubt that energy stocks are currently gathering multiple benefits from “time, place, and people.” Not only has the recent surge in oil prices aroused the enthusiasm of the bulls, hype and industry discussions about “the end of AI is electricity,” but it has also made energy stocks seem to be labeled as “ultimate” AI concept stocks.

By the close of Tuesday, the settlement price of WTI crude oil futures closed up 1.72% to $85.15 per barrel. The settlement price of Brent crude oil futures closed up 1.75% to $88.92 per barrel. The two major global benchmark crude oil futures prices have further reached their highest levels in nearly half a year.

As we mentioned yesterday, global crude oil prices have recently been supported by at least seven major favorable factors, including Iran's consulate in Syria being bombed by Israel, Mexico's plans to restrict crude oil exports, US manufacturing PMI returning to the expansion range, ongoing attacks on Russian refineries, the US will resume energy sanctions against Venezuela, OPEC+ is expected to maintain production limits this week, and hedge funds have begun actively increasing crude oil holdings!

J.P. Morgan analyst Natasha Kaneva predicted earlier last month that the price of Brent crude oil would reach $100 per barrel in September.

At the same time, the industry also anticipates a further surge in global energy demand in the next few years as large amounts of electricity are needed to meet the development of artificial intelligence. Big tech companies are “obsessed” with finding enough energy to power the boom in artificial intelligence, which became an important topic at the CERA Week event hosted by S&P Global last month.

Although the current US administration is vigorously promoting renewable energy, there is growing doubt that wind and solar energy will meet demand. More and more industry insiders are refocusing on fossil fuels as an “old brand” energy source.

The head of the UK's National Grid Plc (National Grid Plc) said last month that due to the booming development of artificial intelligence technology requiring a significant increase in data center computing capacity, the electricity demand for UK data centers is expected to increase about 6 times over the next 10 years.

An industry executive recently said in an interview that many energy producers already believe that the AI revolution will bring about a “golden age” for natural gas. “Natural gas is the only cost-effective energy source that can provide reliable all-weather electricity needed by large technology companies, and power the AI boom.”

Energy market analyst Phil Flynn pointed out that the artificial intelligence revolution itself may also have a major impact on the US oil and gas industry, because the development of AI technology can not only improve the efficiency of finding oil, but also help produce oil in a cleaner way. “Artificial intelligence will eliminate a lot of guesswork to map oil fields. We should be able to determine specific drilling areas where we can get the most oil with the least carbon emissions.”

In the first quarter of this year, there were two energy companies among the top ten biggest gainers in the S&P 500 index — including the one that ranked third in terms of growth$Constellation Energy (CEG.US)$and the one in eighth place$Marathon Petroleum (MPC.US)$. In addition, General Electric, which is in sixth place, also has a large energy business. The number of these companies on the list is almost as high as$Super Micro Computer (SMCI.US)$,$NVIDIA (NVDA.US)$,$Micron Technology (MU.US)$,$Meta Platforms (META.US)$Waiting for AI concept stocks to fight back.

And if “the end of AI is really electricity,” can US energy stocks still have more room to rise in the second quarter? Let's just wait and see.

Editor/jayden