2 Nuclear Energy Stocks in Focus Amid Multi-Decade Data Center Deal

Artificial intelligence (AI)-powered data centers have become a booming industry now. The energy-hungry AI space has made nuclear energy one of the hottest industries on Wall Street over the past year. At this stage, investors should focus on nuclear energy producers.

The US Department of Energy reported that data center energy usage will “double or triple by 2028,” after doubling over the past decade. On May 23, President Donald Trump signed four executive orders to deploy new nuclear reactors and strengthen the supply chain.

These orders aim to increase the U.S. nuclear energy capacity from 100 gigawatt (GW) to 400 GW by 2050. In addition to encouraging the construction of reactors close to military installations and AI-based data center hubs, which need immense power to run, the executive orders give priority to domestic uranium supply.

We recommend investors closely watch two nuclear energy producers — Constellation Energy Corp. CEG and Talen Energy Corp. TLN — for a long-term investment perspective. These two companies recently signed multi-decade nuclear power supply contracts with U.S. corporate behemoths that are part of the so-called “magnificent 7” group. 

These two stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Investors currently holding these stocks should continue to retain them for the long term. On the other hand, every dip in these stocks will provide a good opportunity to enter. 

Constellation Energy Corp.

Constellation Energy is a leading energy company in the United States with a significant thrust on clean energy, especially nuclear energy. CEG’s strategic $5.1 billion capital expenditure through 2025 should help acquire nuclear fuel and increase inventory levels. CEG aims to eliminate 100% of greenhouse gas emissions by leveraging innovative technology. 

Constellation Energy is an industry leader in operating nuclear plants safely, efficiently and reliably. Its acquisition of NRG Energy Inc.’s (NRG) 44% ownership stake in the South Texas Project Electric Generating Station has added a 2,645 MW, dual-unit nuclear plant to its portfolio. 

In late 2024, Microsoft Corp. (MSFT) entered into a 20-year agreement with CEG to revive the Three Mile Island nuclear plant in Pennsylvania. The $1.6 billion investment aims to restart the reactor, which has been dormant since 2019, to provide carbon-free electricity for Microsoft’s expanding data centers. CEG expects to increase nuclear output by 160 MW at Byron and Braidwood, with investments of $800 million through 2029 for required low-pressure turbine replacements.

Recently, Meta Platforms Inc. (META) signed a 20-year energy deal with CEG to supply 1.1 gigawatts of nuclear power to its growing AI data centers in Illinois. Beginning in 2027, this agreement will ensure a steady supply of clean energy. This will help Meta Platforms grow its AI operations and cut carbon emissions. 

Constellation Energy has an expected revenue and earnings growth rate of 0.9% and 9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% in the last 60 days.

Talen Energy Corp.

Talen Energy is an independent power producer and infrastructure company, which produces and sells electricity, capacity, and ancillary services into wholesale power markets in the United States. TLN operates nuclear, fossil, solar, and coal power plants. TLN is also developing battery storage projects. 

Amazon.com Inc. (AMZN) has partnered with TLN in Pennsylvania to power its data centers with nuclear energy. On June 11, TLN announced the expansion of its existing nuclear energy relationship with Amazon to provide carbon-free energy from Talen’s Susquehanna nuclear power plant to Amazon Web Services (“AWS”) data centers in the region.

According to the agreement, TLN will provide AMZN with 1,920 megawatts of carbon-free nuclear power through 2042, with options to further extend its duration. TLN is expected to significantly benefit from the data centers’ astonishing demand for reliable and clean energy. 

Talen Energy has an expected revenue and earnings growth rate of 25.1% and more than 100%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 2.9% in the last 30 days.

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This article originally published on Zacks Investment Research (zacks.com).

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