The utilities sector (XLU) has experienced a major correction due to rising bond yields, the steepest since 1994. Independent power producers such as Constellation, NRG, and Vistra have seen their valuation multiples compress by 2 to 8 turns from recent peaks. XLU now trades around its 10-year average CAPE multiple of 17.8x, offering a more attractive entry point than earlier this year. However, structural AI-driven power demand remains fully intact, with tech giants signing long-term power purchase agreements to fuel their data centers. Mike Khouw recommends a bull call spread on XLU November 40/43 with a net debit of $0.85, targeting a rebound toward recent highs within the next seven to eight weeks.
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