As Wall Street pours billions into artificial intelligence (AI) infrastructure, Oxbow Advisors founder Ted Oakley says investors are ignoring the massive energy and commodity demand needed to power the AI boom — creating an opportunity in beaten-down energy stocks.
Investors Missing AI's Energy Demands
Despite major U.S. tech firms committing massive capital to AI data centers this year, Oakley argues that investors are focused on AI's upside while overlooking the infrastructure, energy and commodity inputs required to build and operate data centers.
“I think they’re just looking at the dream side of that,” Oakley said in a recent interview with Kitco NEWS.
“In order to get that outcome, what do you have to put into this data center to make all of that work?” The answer, he argues, is massive amounts of energy and commodities — sectors he believes the market is undervaluing.
Read Also: Top 2 Energy Stocks That May Fall Off A Cliff This Month
‘Buy Energy First’
Highlighting what he described as a historic market imbalance, Oakley said the energy sector now makes up roughly 3% of the S&P 500, down sharply from 32% seen in the 1980s. He expects a sharp market rotation if institutional investors realize they are underallocated to energy during a tightening commodity cycle.
“If you’re gonna start buying things today, buy energy first,” Oakley advised. He noted that when institutions finally recognize the deficit, “they will be forced to buy all at once,” potentially triggering a rally similar to last year's move in gold mining stocks.
Dividend Picks For The Shift
To capitalize on the disconnect, Oakley said Oxbow Advisors holds positions across the energy supply chain, focusing on companies with dividend yields ranging from roughly 4% to 10%.
Oakley's portfolio includes integrated majors like Exxon Mobil Corp.(NYSE:XOM) and Chevron Corp.(NYSE:CVX), alongside smaller producers such as Matador Resources Co.(NYSE:MTDR) and Antero Resources Corp. (NYSE:AR).
For infrastructure and drilling, he favors Enterprise Products Partners L.P. (NYSE:EPD), Energy Transfer L.P.(NYSE:ET), MPLX L.P. (NYSE:MPLX), and Transocean Ltd.(NYSE:RIG).
A Warning For Passive Investors
Oakley cautioned that passive investors heavily concentrated in S&P 500 index funds could miss major tactical shifts if market leadership rotates away from mega-cap technology stocks.
Oakley warned that passive, “autopilot” investors relying on the S&P 500 will miss crucial tactical shifts and risk severe wealth destruction when the tech momentum inevitably fades.
Read Also: Wall Street's Most Accurate Analysts Give Their Take On 3 Energy Stocks Delivering High-Dividend Yields
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
