Why Constellation Energy and Vistra shares are building on massive gains

By Emily Bary

Constellation has a new nuclear-power deal with Microsoft. Both Constellation and Vistra shares have more than doubled this year on optimism for data-center power deals.

Semiconductor stocks aren't the only hot artificial-intelligence plays leading the market this year. Energy stocks that can help supply power to data centers have also been big winners.

Case in point: the 19.5% Friday rally in Constellation Energy Corp.'s stock (CEG) at current check. That comes as the company announced earlier Friday that it's inked a 20-year power-purchase agreement with Microsoft Corp (MSFT). Constellation's stock is on track to post a record high.

Through the deal, the company plans to launch the Crane Clean Energy Center and restart the Three Mile Island Unit 1 nuclear reactor in Pennsylvania.

"Powering industries critical to our nation's global economic and technological competitiveness, including data centers, requires an abundance of energy that is carbon-free and reliable every hour of every day, and nuclear plants are the only energy sources that can consistently deliver on that promise," Constellation Chief Executive Joe Dominguez said in a release.

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The Three Mile Island Unit 2 reactor partly melted down in 1979, according to the U.S. Nuclear Regulatory Commission, which called the incident "the most serious accident in U.S. commercial nuclear power plant operating history."

The Unit 2 reactor was permanently shut down. Constellation said in Friday's release that the Unit 1 reactor's "long-term operation was not impacted by the Unit 2 accident" and rather was "prematurely shuttered due to poor economics."

Jefferies analyst Paul Zimbardo began coverage of Constellation shares earlier this month, calling the company the largest nuclear owner in the U.S. with a fleet that's "ripe for data-center contracts," though his hold rating at the time reflected that he thought the "true magnitude of the data-center upside [was] still unclear."

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Shares of Vistra Corp. (VST), another nuclear owner, are up almost 15% in afternoon action Friday. The stock is up for its 10th trading day in a row and has seen gains of 44% over that span. That would translate to its best 10-day stretch on record, according to Dow Jones Market Data.

Vistra shares are up 177% on the year, while Constellation shares are up 114%.

Big market players are clearly paying more attention to the energy needs of data centers.

BlackRock, Global Infrastructure Partners, Microsoft and MGX announced earlier this week that they were creating a massive fund to "enhance American competitiveness in AI while meeting the growing need for energy infrastructure to power economic growth."

The fund will initially look to unlock $30 billion of funds from private equity and "in turn will mobilize up to $100 billion in total investment potential when including debt financing."

-Emily Bary

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09-20-24 1341ET

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