This year, nuclear energy became a hot topic for investors, thanks to the global shift towards sustainable energy and the growing demand from tech companies. It's a reliable and clean energy source, running at full capacity over 92% of the time—much more dependable than natural gas (NGF25) or renewable options like wind and solar. This makes it a great choice for powering artificial intelligence (AI) data centers, which need lots of electricity to run smoothly.
This renewed interest is evident in the big bets hedge funds are placing on nuclear stocks like Vistra Corp (VST) and Talen Energy Corporation (TLN), as noted by Goldman Sachs in their Q3 analysis. That places these companies at the forefront of the nuclear energy surge, reflecting a bigger trend of investing more in clean energy tech.
And names like Vistra and Talen are leading the charge in turning nuclear energy from an old-school power source into a vital part of the AI boom. Vistra has even outshined Nvidia (NVDA) as the top performer in the S&P 500 Index ($SPX) this year. Let’s look at these two top nuclear energy stocks and see what makes them promising candidates for long-term growth in the changing energy scene.
#1. Vistra Corp (VST)
Vistra Corp (VST) is a big name in the U.S. energy scene, known for its mix of natural gas, nuclear, solar, and battery storage facilities. Their main goal is to provide energy solutions while focusing on clean energy, making them a key player in the shift towards sustainable power.
In 2024, Vistra's stock has been on fire, with a massive year-to-date gain of 300%. The shares set a new peak of $168.67 as recently as Nov. 22.
With a market cap of about $54.4 billion, Vistra is a major force in the energy sector. Its price-to-earnings ratio is 27.77, which is higher than the sector average of 18.60. Still, its forward dividend yield of 0.55% and a payout ratio of 12.76% show it's committed to rewarding its shareholders.
Financially, Vistra reported a GAAP net income of $1.83 billion for Q3 2024 and cash flow from operations at $1.7 billion. Management upped their 2024 adjusted EBITDA guidance to between $5.0 billion and $5.2 billion, not counting potential nuclear tax credits. For 2025, they expect an adjusted EBITDA range of $5.5 billion to $6.1 billion, showing strong future earnings potential.
Vistra's recent moves have strengthened its market position even more. Their partnership with Sunrun (RUN) to build a virtual power plant through the TXU Energy & Sunrun Battery Rewards program shows their innovative approach to managing energy and stabilizing the grid.
Plus, buying Energy Harbor earlier this year was a big deal, adding 4,000 MW of nuclear capacity to their lineup—perfect timing as tech companies look for carbon-free power for their data centers and AI operations.
Hedge funds have also noticed Vistra's potential, with big investments from firms like Appaloosa Management adding a significant stake in the company during Q3.
Analysts are very positive about Vistra's future, with a consensus rating of “strong buy. Out of the 12 in coverage, 11 say it's a ”strong buy" and one says “moderate buy.” The mean target price is set at $162.33, about 5% above Monday's closing price.
#2. Talen Energy Corporation (TLN)
Talen Energy Corporation (TLN) is another big player in the energy scene, focusing on generating and supplying electricity to wholesale markets. They run a mix of power plants, using their existing assets to keep up with the growing demand from data centers and electrification while ensuring grid reliability.
In 2024, Talen's stock has been on a roll, jumping 227% on a YTD basis.
With a market cap of about $10.9 billion and a forward price-to-earnings ratio of 15.55, Talen looks reasonably valued at current levels.
In its mid-November earnings, Talen reported a GAAP net income of $168 million for Q3 2024, and $916 million for the year so far. Adjusted EBITDA reached $230 million for the quarter and $606 million year-to-date, showing strong operational performance.
Talen upped its 2024 forecast, expecting adjusted EBITDA between $750 million and $780 million and free cash flow between $265 million and $285 million. Looking ahead to 2025, they’re sticking with their guidance of adjusted EBITDA ranging from $925 million to $1.175 million.
Talen's recent moves include taking full control of the Nautilus JV from TeraWulf (WULF), boosting their ability to power data centers more efficiently. CEO Mac McFarland emphasized how important their existing generation is for meeting demand growth driven by electrification and data centers.
Even though they face regulatory hurdles, like FERC's decision on Susquehanna ISA, Talen is working on commercial solutions with Amazon's (AMZN) AWS and continuing its share buyback program, which still has $1.2 billion available.
Hedge funds have noticed Talen's potential too, with institutional ownership rising by 45.65% in the last quarter alone, reflecting confidence in the company's future prospects.
Analysts are very optimistic about Talen's future, with all nine recommending it as a buy—eight say “strong buy,” and one says “moderate buy.” The average target price is set at $237.22, suggesting about 13% upside from Monday's close.
Conclusion
In conclusion, both Vistra Corp and Talen Energy Corporation have emerged as standout performers in the nuclear energy sector, drawing significant interest from hedge funds due to their impressive growth trajectories and strategic initiatives. Vistra's robust market performance and innovative partnerships underscore its commitment to sustainable energy solutions, while Talen's focus on digital infrastructure and reliable power generation positions it well for future demand. With strong analyst endorsements and promising financial outlooks, these companies exemplify why nuclear energy stocks are becoming increasingly attractive investments in the clean energy transition.
