TLDR
- Tech stocks now make up 34.5% of the S&P 500’s market cap, creating concentration risk for investors
- Healthcare and energy sectors are trading at significant discounts compared to tech valuations
- AI data centers are driving massive electricity demand, benefiting nuclear and clean energy providers
- Companies like Constellation Energy, NRG Energy, and Vistra are positioned to power AI infrastructure
- Energy stocks offer inflation hedge potential while healthcare provides value opportunities
The stock market’s growing concentration in technology companies is pushing investors to consider alternative sectors, with energy and healthcare emerging as attractive options. Tech stocks have reached a record 34.5% of the S&P 500’s total market capitalization, up from 20% in 2018.
The artificial intelligence boom is creating unprecedented electricity demands. Training OpenAI’s GPT-4 required about 30 megawatts of power, enough to supply 15,000 to 30,000 households for one hour. This surge in energy needs is reshaping the investment landscape.
Technology giants are dramatically increasing capital expenditures for AI infrastructure. Alphabet projects $85 billion in capital spending this year, up from $52 billion in 2024. Meta expects about $70 billion in 2025, compared to $39 billion in 2024.
These rising costs are pressuring the traditional tech investment thesis. Capital expenditure as a percentage of revenue is now nearing 25%, double the rate from a decade ago. Free cash flow generation is under pressure across major tech companies.
Nuclear Power Companies Lead AI Infrastructure
Clean energy providers are capitalizing on AI’s power requirements. Constellation Energy operates over 20 nuclear plants and produces about 10% of the nation’s emissions-free electricity. The company secured a 20-year power purchase agreement with Microsoft.
Constellation is acquiring Calpine for $26.6 billion to expand its natural gas and geothermal capacity. The deal targets high-growth markets like Texas and California where data centers are concentrated. The company generated $24.2 billion in revenue with a 12.3% profit margin.
NRG Energy has become one of the S&P 500’s top performers in 2025. The company doubled its asset base with a $12 billion acquisition of generation facilities. Management predicts 14% compound annual earnings growth over the next five years.
Vistra operates enough capacity to power 20 million homes across multiple states. The company owns four nuclear facilities and has the second-largest energy storage capacity in the United States. Nuclear facilities provide the stable, 24/7 power that AI data centers require.
Healthcare Sector Offers Value Opportunities
Healthcare stocks are trading at their cheapest levels relative to the market in 30 years. The sector is down 3% this year while tech has gained 16.4%. Concerns about drug pricing and regulatory changes under Robert F. Kennedy Jr. have pressured valuations.
Eli Lilly dominates the diet drug market with Zepbound and Mounjaro injectables. The company is developing orforglipron, a GLP-1 diet pill that could reach market in late 2026. Lilly stock has fallen from nearly $1,000 last summer to around $684.
UnitedHealth has been the worst Dow Jones stock this year, falling nearly 50% to $271. The decline followed earnings disappointments from underpriced Medicare Advantage plans. Berkshire Hathaway purchased 5 million shares in the second quarter, boosting after-hours trading.
Sector Valuations Show Clear Disparities
Energy and healthcare stocks trade at approximately 15 times forward earnings. Tech stocks average 30 times forward earnings and 10 times sales. Nvidia trades at 20 times 2025 sales, while Palantir reaches almost 100 times sales.
U.S. crude oil prices have declined 10% this year to $63 per barrel. Energy sector stocks measured by the Energy Select Sector SPDR ETF remain flat for the year. Many exploration and production companies are down 10%.
The current energy downturn may represent a buying opportunity. Conventional energy sources remain necessary to power AI infrastructure, a factor not reflected in current stock prices. Energy also provides a hedge against inflation and higher interest rates.
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