Topline
Big tech’s appetite for energy could means upside for nuclear power stocks
Key Facts
Data center demand for energy could grow 160% by 2030, according to Goldman Sachs.
Constellation Energy runs nuclear power plants that big tech companies are using to run AI chatbots.
Since last September, Constellation Energy stock has risen, fallen, and recovered.
Talen Energy — which struck a deal now in limbo with AWS — could also benefit from this demand.
Shares of Constellation Energy — which contracted to provide Microsoft nuclear power from Three Mile Island, as I wrote in a September 2024 Forbes post — have risen 29% this year, according to GoogleFinance.
Will the stock price rise further? There are two reasons to consider doing so:
- Data center demand for energy is growing rapidly
- Constellation Energy has secured major nuclear power deals with Microsoft and Meta
I would hesitate to buy Constellation Energy because the shares have been volatile and analysts estimate they are somewhat overvalued.
“It’s clear that we’re in a whole new ball game on cost,” Constellation CEO Joseph Dominguez said on a company earnings call last month, reported Reuters. “Certain natural gas plant builds, for example, have tripled in cost over the last decade in some cases,” he added.
Nevertheless, demand for nuclear power is likely to grow and other providers — such as PacifiCorp — may be worth considering.
Generative Artificial Intelligence Will Fuel Demand For More Energy
Generative AI fueled significant demand for energy in 2024 and is likely to grow considerably by 2028. Last year data centers used 200 terawatt-hours of energy — between 27% and 38% of which powered AI-specific servers, according to the Department of Energy. That is about the amount of power Thailand uses in a year, noted the DOE.
By 2028, much more energy will go to data centers. Between 2024 and 2028, data center consumption of U.S. electricity may triple, from its current 4.4% to 12%, DOE notes.
AI’s share of that energy will rise substantially. Between 2024 and 2028, the power going to AI-specific purposes will rise at a 32.6% average annual rate to 244 terawatt-hours per year — the midpoint of a forecast range between 165 and 326 terawatt-hours per year, DOE estimated.
Nuclear energy accounts for a fraction of the U.S. energy supply but that is expected to grow in the future. Today, only 20% of electricity here comes from nuclear — representing “a fraction of AI data centers’ operations,” reported MIT Technology Review.
While Meta, Amazon, and Google have joined a pledge to triple the world’s nuclear capacity by 2050, additional nuclear capacity could take “years, perhaps decades, to materialize,” MIT Technology Review noted.
Constellation Energy Will Supply Nuclear Energy To Microsoft And Meta
Last September, Constellation Energy announced a deal to supply nuclear energy to Microsoft — and on June 3, Meta inked a very different nuclear deal, according to CNBC.
Constellation — which owns the Three Mile Island facility in Pennsylvania that suffered an accident in March 1979 — signed a 20-year agreement for Microsoft to pay the nuclear energy leader about $16 billion, last September, noted my Forbes column.
This week Meta signed a 20-year agreement to buy “about 1.1 gigawatts of nuclear power from Constellation’s Clinton Clean Energy Center in Illinois,” beginning in 2027, CNBC reported.
While terms of the deal were not disclosed, Meta will not use the power for its data centers. Instead, Constellation — which will expand Clinton’s output by 30 megawatts — will keep supplying the power to the regional grid while contributing to Meta’s “goal of 100% clean electricity,” wrote CNBC.
Before Meta’s commitment, Clinton was at risk of closing in 2027 when its zerio emissions credit expires. “We are proud to partner with Meta,” Dominguez told CNBC.
“They figured out that supporting the relicensing and expansion of existing plants is just as impactful as finding new sources of energy. Sometimes the most important part of our journey forward is to stop taking steps backwards,” he added.
Meta also expressed enthusiasm for this arrangement. “Securing clean, reliable energy is necessary to continue advancing our AI ambitions,” Meta head of global energy Urvi Parekh said.
“We are proud to help keep the Clinton plant operating for years to come and demonstrate that this plant is an important piece to strengthening American leadership in energy.”
Constellation Energy Stock Could Fall
It is not all good news for Constellation investors. The company’s stock rose sharply on the announcements of these deals — yet it has fallen after recent earnings reports. Moreover, analysts view the stock as somewhat overvalued.
For example, after the September 20 announcement of its deal with Microsoft, the stock rose 22%, according to SeekingAlpha. Moreover, the deal with Meta propelled Constellation’s shares up 15%.
However, Constellation has lost value after recent earnings reports. For the June 2024-ending quarter, the company fell short of earnings and revenue expectations, noted my Forbes post.
While the company’s third-quarter profit and revenue that beat expectations and raised its full-year outlook — which it had not done in more than a year — Constellation’s stock price fell after a disappointing regulatory ruling, according to MarketWatch.
To be sure, Constellation’s fourth quarter 2024 report featured better than expected revenue and operating income — however, the stock lost about a third of its value in the six weeks following the report.
Finally, Constellation stock fell in May after reporting disappointing earnings for the March 2025-ending quarter. Rising costs to build and operate its electricity infrastructure “caused the major U.S. power company to miss Wall Street expectations for first-quarter profit,” noted Reuters.
Wall Street considers the stock slightly overvalued. Based on 12 Wall Street analysts offering 12 month price targets, Constellation Energy stock trades slightly above the average price target of $303.20, noted TipRanks.
Talen Energy Shares May Have Upside Potential
In March 2024, Talen Energy struck a deal to sell for $650 million its Cumulus data center — which is adjacent to a Pennsylvania nuclear plant, reported Data Center Frontier — to Amazon Web Services.
However, in November 2024, the Federal Energy Regulatory Commission ruled to block an interconnection service agreement that would have allowed Talen to increase the power supplied to the AWS data center co-located with its Susquehanna nuclear plan due to uncertainty about whether it would boost electricity rates, noted Data Center Frontier.
Talen’s first quarter report echoed Constellation’s. Higher interest and energy expenses contributed to Talen’s first quarter loss. The utility’s interest costs “jumped 25.4% to $74 million during the reported quarter, while total energy expenses increased by 10.8% to $235 million,” Reuters reported.
The absence of gains from the 2024 sale of the Cumulus data center to AWS also diminished Talen’s profit.
If Talen can sell more such nuclear data centers to cloud services providers, its revenue, profits and stock price could rise.