This edition of market factors starts with top picks in the popular utilities sector and moves on to apparent investor apathy toward the AI revolution just as it takes hold in the economy. The diversion is a wandering perspective on electric vehicles and we have quick hits as always.
Power
CIBC utilities analyst Mark Jarvi completed a review of his price targets after moving his profit reference (the time period for the “E” estimate for the price-to-earnings ratio) from a 20/80 split between 2026 and 2027 to completely 100 per cent for next year.
The biggest potential pitfall for income investors in the domestic utilities sector is the sharp 18-per-cent year-over-year decline in Alberta power prices. Transalta Corp. TA-T is most likely headed for a negative revenue surprise. Capital Power Corp. CPX-T, more geographically diversified and also hedged against lower power prices, is less affected. Both stocks remain outperform rated as plans for data centres in Alberta await clarity.
For renewable power, Mr. Jarvi is expecting Brookfield Renewable Partners BEP-UN-T to announce profit results in line with consensus and better than expected earnings from Northland Power Inc. NPI-T
The renewable power sector was beset by weak wind and hydrology conditions that limited output during the first quarter although Northland Power managed to dodge the trend with strong offshore wind conditions. Unsurprisingly to me, Ontario weather was too dingy to produce much solar power.
The analyst is not expecting strong results from Clearway Energy Inc. thanks to low wind conditions in their California facility. Mr. Jarvi’s forecast for SOLV Energy Inc. is roughly 9.0 per cent below consensus thanks to seasonality effects.
CIBC’s preferred names in the utilities sector are Capital Power, Brookfield Renewable Power, ATCO Ltd. (thanks to a stronger outlook for Canadian Utilities Ltd. in which it owns a controlling stake) and Fortis Inc.
Vinod Khosla speaks onstage at the HumanX conference in San Francisco on April 8.Big Event Media/Getty Images
Technology
My sense, by looking at audience interactions, is that Report on Business readers are losing interest in AI as an investment theme at the exact time it’s beginning to transform the economy.
Citi hosted an impressive lineup of speakers at its AI Summit last week, with participation from Anthropic, OpenAI, Alphabet, Amazon and IBM among many others. The experts provided many indications of acceleration in AI adoption. Software developers are now running multiple AI agents that write 80 per cent of their code. An OpenAI executive noted a mass movement in AI solutions moving from pilot projects into production.
Ominously, billionaire venture capitalist Vinod Khosla (also the co-founder of Sun Microsystems) observed that “we are moving from giving AI to people, to people working for AI, as the organizing structure of the enterprise” which I hope is mostly tech bro hype and not reality. Financial services, legal system, life sciences and health care are the business sectors with the fastest AI adoption. The use of Voice AI in consumer areas is another major growth area.
Citi analyst Heath Terry’s interprets the conference observations as more or less assuring a shortage of computing power – data centres essentially – until at least 2029 and likely beyond. This is a positive sign for hardware providers like Nvidia Corp, Broadcom Ltd., Corning Inc., AMD and peripheral data centre plays like monitoring software (Datadog Inc.), electrical power equipment (GE Vernova, Schneider Electric) and environment cooling (Vertiv).
Citi analysts also remain bullish on the hyperscalers – Alphabet, Meta Platforms and Amazon are mentioned specifically – as the only companies with the resources and expertise to provide AI infrastructure and thus the holders of a limited resource and pricing power.
According to the brilliant Venezuelan economist Carlota Perez, the usual stages of major technological change are idea, application design, related finance bubble, bubble implosion, then dispersion of the technology throughout the economy. Perhaps investors are waiting for the bubble to burst before investing, but the point remains that a dramatic transformation of the economy and our daily lives is under way and investment in some form is prudent in all portfolios.
Diversions
Macleans columnist Joanna Kyriazis penned Will Outrageous Gas Prices Restart the EV Boom? and my immediate answer is no. I’m not entirely sure why – even if I’m marginally part of the problem.
U.K. advertising executive and pundit Rory Sutherland made a compelling argument for electric vehicles during an interview in June of last year, calling them “better in every dimension.” He cited performance, noise, comfort, driveability, maintenance and ease of manufacturing as some of the reasons.
Mr. Sutherland made his point explicit by imagining a world where electric cars dominated and internal combustion engines (ICE) were new. The argument for ICE cars would sound ludicrous – a massively more complicated car with a massively complicated thing called a gearbox and a big container of flammable liquid on board.
Yes, we’ve all seen videos of terrifying lithium ion battery fires but fire investigators estimate the odds of an electric vehicle fire at 25 per 100,000 vehicles compared with 1,530 for ICE cars.
Politics plays a role in electric vehicle sales as it does in almost every issue in the current world. Many consumers won’t buy electric vehicles because they don’t want to be confused with a left wing climate activist or Hillary Clinton. More reasonably, others are worried about charging infrastructure.
As for me, I ride motorcycles. I didn’t plan it this way but the bike I own now came with a special exhaust system that makes it sound awesome in a very ICE-ish way. The thought of owning an electric motorcycle and sounding like George Jetson gives me hives, because of the noise and because I like to shift gears. I console myself with the fact that motorcycles get great gas mileage and I can’t ride for more than two hours before my aging joints seize up.
The lack of demand for electric vehicles is curious in light of Mr. Sutherland’s strong argument. I would have thought younger generations, more climate conscious, would have supported rising market share as Cadillac-loving cohorts transitioned to wheelchairs.
Government subsidies return this year and inexpensive Chinese-made EVs are imminent so 2026 is possibly the year of an inflection point in domestic EV sales. The surprise is that it hasn’t happened already.
The essentials
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Globe Investor highlights
The biggest initial public offering in history is just around the corner, and many Canadians are going to have money on the line, whether they like it or not, says Tim Shufelt
David Berman explains why investors aren’t so happy about GDL’s return to deal-making
Ted Dixon looks at five companies that are repurchasing shares and seeing insider buying
CIBC’s Sid Mokhtari on the stocks and ETFs that should be outperformers – and the two colliding cycles that threaten market complacency
Quick hits
The outlook for uranium markets remains the same – extremely positive. TD Cowen analyst Craig Hutchison published a report Friday highlighting the license renewal for California’s last nuclear power facility near San Luis Obispo, which had previously been scheduled for shutdown last year. There were 13 license renewals in 2025 and Mr. Hutchison expects this to play an important role in continued strong uranium demand. The analyst cites Cameco as one of the largest beneficiaries.
Fund managers are nervous but buying aggressively, according to BofA Securities numbers. Investment strategist Michael Hartnett’s weekly Flow Show report reminded investors that his monthly survey of institutional investors uncovered the most bearishness since June of last year but, at the same time, inflows to global equities and investment grade bonds are on pace to set all-time records.
The recent outperformance of U.S. small-cap stocks is a bit counterintuitive in that small caps generally underperform during periods of geopolitical uncertainty and market volatility. Bank of Nova Scotia strategist Hugo Ste-Marie attributed the trend to lower borrowing costs for smaller firms and rising profitability. The latter might, and I emphasize might, be a sign of a cyclical sector resurgence and U.S. economic acceleration.
Read this week’s earnings and economic calendar here