The ASX IVV delivered total returns (including dividends) of 37.34%, according to preliminary numbers yet to be confirmed by ETF provider iShares.

The IVV ETF closed the year at $63.24 per unit on 31 December. It hit a record high of $64.79 per unit on 27 December.

The ASX IVV seeks to track the performance of the S&P 500 Index (SP: INX), which represents the 500 largest US stocks, before fees.

According to the S&P Global website, the S&P 500 rose by 23.31% to close at 5,881.63 points on 31 December. If we add dividends, the S&P 500's total gross return for the year was 25.02%.

(The disparity between the growth rate of the S&P 500 and the ASX IVV is due to the currency exchange. In AUD terms, S&P Global reports that the S&P 500 rose by 35.9%, with total gross returns of 37.78%.)

The S&P 500 significantly outperformed the benchmark S&P/ASX 200 Index (ASX: XJO), reminding us of the importance of geographical diversification in our investment portfolios.

The ASX 200 delivered a healthy but vastly inferior total gross return of 11.44%.

US shares grew strongly due to investor enthusiasm, excitement over artificial intelligence (AI), a resilient economy, Donald Trump's US presidential election, interest rate cuts in the second half of 2024, and other factors.

JP Morgan Global Market Strategist Ian Hui said the Magnificent Seven also powered the S&P 500's rise due to the companies' projected earnings growth of 36.2% vs. 3.1% for the balance of the index.

The Magnificent Seven US shares are Meta Platforms, Amazon, Apple, Alphabet, Nvidia, Microsoft and Tesla.

Australian investors were certainly mindful of the runaway US market in 2024. Vanguard reported much larger inflows into exchange-traded funds holding international shares (mostly US shares) last year.

Stake market analyst Samy Sriram said the iShares Core S&P 500 AUD ETF was the most popular equity purchased via the online trading platform last year. (Check out the 10 most bought US shares here).

Which stocks in the iShares S&P 500 AUD ETF rose most in 2024?

According to Market Watch, these were the 10 best-performing US stocks within the ASX IVV in 2024.

Can US shares keep going like this in 2025?

Top broker Goldman Sachs forecasts the S&P 500 to return 10% in 2025. Goldman's research team predicts the S&P 500 will rise to 6,500 points by the end of 2025.

David Kostin, Goldman's chief US equity strategist, expects the S&P 500 will have a third consecutive year of gains amid strong economic expansion and earnings growth of 11% in the new year.

JP Morgan's Hui says there are early signs that investors are starting to move away from the Magnificent Seven due to their high valuations and still rising but slowing earnings growth rates.

The post Star-spangled returns: iShares S&P 500 AUD ETF soars 35% in 2024 appeared first on The Motley Fool Australia.

The broader benchmark S&P 500 has ripped all year and is now up nearly 22%. The index is a bellwether for the entire market and includes 500 larger companies in many industries. Technically, the S&P 500 has more than 500 stocks because some companies have multiple classes of shares. With such a wide sample size, many stocks in the S&P 500 have performed worse than the broader index and many have performed better.

Here are the four hottest stocks in the S&P 500 so far this year, and believe it or not, only one is in the "Magnificent Seven." Can you still buy these stocks after such a good run?

1. Vistra Corp -- 224%

Utility stocks have had a bang-up year, as lower interest rates have led investors to gravitate toward dividend-paying stocks. However, something else has been fueling Vistra (NYSE: VST), the largest competitive power generator in the U.S. That, of course, is artificial intelligence. Interestingly, Vistra looks to be a potential "picks and shovels" trade for the AI sector, but in a very different way than semiconductors. AI is powered by data and data centers, which are very energy-intensive. Tech companies believe a good alternative could be to connect data centers to nuclear plants. Vistra owns four nuclear reactors after acquiring Energy Harbor in 2023.

2. Nvidia -- 172%

Investors shouldn't be surprised to see this name on the list, considering it's been arguably the most talked about ticker in the investing world. Nvidia (NASDAQ: NVDA) is the classic "picks and shovels" play on AI, designing chips that make AI possible. Nvidia's chips are used by some of the world's largest and most innovative tech companies, including OpenAI, Amazon, Google, and Microsoft. Some analysts estimate that Nvidia's market share for the AI semiconductors that helped make ChatGPT technology possible is between 70% and 95%. Since the start of 2023, Nvidia's revenue and profits have grown like a weed.

NVDA Revenue (Quarterly) data by YCharts.

Palantir -- 153%

Palantir Technologies (NYSE: PLTR) went public during the pandemic in 2020, and it's been quite the ride ever since, with the stock up almost 370%. What does Palantir do? You guessed it: AI. Palantir uses AI to help people and organizations analyse vast quantities of data in a user-friendly way that doesn't require them to learn some of the more complex languages and techniques at the core of AI.

Palantir has constructed platforms that use AI to manipulate and manage data. The company then builds applications atop these platforms so humans with no AI expertise can analyze this data. The company's largest client is the U.S. government, and it has gotten large contracts with the U.S. State Department and the U.S. Army.

Constellation Energy -- 127%

Constellation Energy (NASDAQ: CEG) is the largest carbon-free energy producer in the U.S. It's based in Baltimore and owns sustainable energy assets, including wind and solar farms and hydropower plants. Roughly 90% of the energy from Constellation is carbon-free, and the company is responsible for 10% of all carbon-free energy in the U.S. Constellation also owns 21 nuclear reactors at 12 sites across the country, making it the largest operator of nuclear reactors in the U.S. Investors believe it could be a critical asset in the future powering of data centres and AI.

Earlier this year, Constellation's CEO Joe Dominguez cited AI as one of the industries it is seeing demand from in terms of nuclear energy. Constellation is projecting that major tech companies will invest $1 trillion in data centres over the next five years. 

Are these AI stocks buys?

AI has driven stocks to meteoric valuations, and this sentiment can be seen in the current price-to-earnings ratios of these four stocks.

NVDA PE Ratio data by YCharts.

All these companies are compelling given what they do and the potential for AI to fundamentally shift almost every aspect of our lives. I've never been a huge growth investor who buys companies at massive valuations. That's because the margin for error gets slim, and a simple miss on earnings or disappointing guidance can send the stock tumbling.

But for long-term investors who can handle some volatility, I think all of these stocks offer promise. Of these four, I like the utility names like Constellation and Vistra better right now. They've gotten expensive as a group, but pay dividends and are not entirely dependent on AI. So they can benefit from the AI boom, but also have other sources of business to fall back on if AI stumbles.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Power utilities aren't always seen as the most exciting way to invest, but investors might need to rethink that opinion, because the top-performing S&P 500 index stock of the year is retail electricity and power generation utility Vistra (NYSE: VST), up a whopping 210% this year. That beats Nvidia's (NASDAQ: NVDA) 155% increase. The two events are not unconnected. Here's why and how Vistra stock has performed so well this year.

Data centers, electricity demand, and clean energy

It's no secret that the burgeoning demand for artificial intelligence (AI) applications is the reason for the step change in expectations for data center demand. That's what's fueling increased demand for graphics processing units (GPUs) and high-performance computing chips. That's great news for technology companies like Nvidia and Taiwan Semiconductor Manufacturing.

While the latter are apparent beneficiaries, there are also data center equipment companies like Vertiv Holdings. If you are looking for a value play on the theme, then the heating, ventilation, air conditioning, and refrigeration sector, particularly Johnson Controls, is worth looking at.

However, I digress. This article's focal point is the need to power data centers and increased electricity demand. In particular, it is in an environment where policymakers remain committed to the clean energy transition. That's where companies and utilities like Vistra and Constellation Energy (NASDAQ: CEG) come into play.

Vistra 

Vistra is a retail electricity and power generation company. At the end of 2023, it counted 4 million retail customers, and the acquisition of Energy Harbor in March added another 1 million. The Harbor Energy deal also added 4,000 megawatts (MW) of nuclear generation to go along with the 36,702 MW with which Vistra ended 2023, with 2,400 MW from nuclear.

As such, the deal made Vistra "the largest competitive power generator in the country" and made it the second-largest competitive nuclear generator in the U.S. Investors are falling in love with nuclear energy as a clean, sustainable, and zero-carbon baseload option. That's particularly relevant as coal-powered plants are being closed down in accordance with the clean energy transition.

The clean energy transition

While nobody doubts that the transition will take place, it's also indisputable that sentiment over the pace of the transition has changed, too. The long-term policy outlook remains favorable to renewable energy; natural gas will likely be a significant part of energy generation for decades.

That's also good news for Vistra, because about 24,000 MW of its current 41,000 MW capacity comes from natural gas. As such, the rise in the stock price this year also reflects a more favorable view of natural gas and a vote of confidence in Vistra's 6,400 MW nuclear capability.

Enter Amazon and Microsoft

The three biggest cloud service providers are Amazon Web Services, Microsoft's Azure, and Alphabet's Google Cloud, and they need to ensure long-term power to support their data centers. As such, Microsoft and Amazon completed long-term power purchase agreements (PPA) with Vistra this year.

Still, it's the 20-year PPA that Microsoft recently signed with Constellation Energy that has excited the market. Microsoft is purchasing power for its data centers, and Constellation will restart the Three Mile Island nuclear plant to deliver on the agreement. That's a positive for the market, and so is the price that Microsoft is willing to pay for the power.

According to Reuters, Microsoft is paying up to $115 per megawatt-hour (MWh) in the agreement. That compares favorably with Vistra's total realized price of $51.20 MWh in the second quarter of 2024.

A stock to buy

The bull case for Vistra rests on the idea that there's significant upside potential for future market pricing for nuclear-powered energy, given the Microsoft/Constellation deal and burgeoning demand stimulated by AI. Vistra's acquisition of Energy Harbor strengthened that case. In addition, Vistra recently announced it was buying the remaining 15% of its Vistra Vision subsidiary (which houses its zero-carbon nuclear, energy storage, and solar generation businesses) for $3.085 billion.

Vistra's natural gas, nuclear, and renewable capabilities are positive assets for the clean energy transition. Considering these factors, it's no surprise that the sector is hot. Adding falling interest rates (utilities are often seen as interest rate sensitive due to their debt loads) is a recipe for sharp price appreciation.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Constellation Energy, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Johnson Controls International and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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