S&P 500 component Constellation Energy announced Thursday it is in discussions with major companies to provide nuclear power for artificial intelligence (AI) data centers, with projects expected to scale up through the decade.
Constellation Energy reported on its first-quarter earnings call Thursday that data centers at its nuclear reactors could come online in 2026-2028 and ramp up from there.
"The data economy and Constellation's nuclear energy go together like peanut butter and jelly," Chief Executive Joe Dominguez said Thursday on the earnings call.
"We're in advanced conversations with multiple clients, large — well-known companies that you all know — about powering their needs," Dominguez added. "While we're not done yet, I do expect that we will finalize agreements that will have long-term and transformational value."
Top hyperscalers — the largest cloud, data center and AI providers — include Amazon.com's AWS, Microsoft, Meta and Alphabet. In March, Talen Energy announced its sale of a 960-megawatt data center campus to AWS for $650 million, sited on its Pennsylvania nuclear plant.
Dominguez's comments come as Constellation Energy Q1 earnings skyrocketed 858% to $2.78 per share. Revenue declined 18% to $6.16 billion. Adjusted earnings grew 133% to $1.82 per share in Q1. Analysts had expected EPS of $1.30 and sales totaling $6.62 billion.
Constellation Energy also reaffirmed full-year adjusted earnings guidance of $7.23-$8.03 per share on Thursday.
Last month, the nuclear energy stock authorized an additional $1 billion for stock buybacks and spent more than $500 million to repurchase shares in Q1.
Constellation Energy, a S&P 500 stock, edged down 0.5% to 214.93 during market trade on Friday. On Thursday, CEG advanced 3.8% to 215.91.
AI Is Going Nuclear
Even more than the earnings growth, analysts had their eyes on whether Constellation, the largest nuclear power plant operator in the U.S., would announce long-term contracts to put AI data centers at its nuclear plants.
Amid the AI gold rush, companies are hungry for the energy needed to power data centers. The data centers, in turn, act as training and distribution centers for the machine learning processes that drive AI.
Nuclear power is one possible answer.
"We're seeing interest in developing projects that are on a size and scale that presently don't exist but will be needed for training systems and other things to kind of build out and support the need for all of these foundational models," Dominguez said Thursday.
The Constellation chief added that many companies are focused on nuclear power because they aren't interested in "emitting technologies" and because they have net-zero sustainability goals.
However, AI data centers are not going to be on CEG nuclear plants this year. Dominguez estimated projects will begin in 2026-2028 and it "ramps over time as the data centers are built."
Ahead of earnings, Morgan Stanley analyst David Arcaro expected CEG could sign contracts as soon as the third quarter.
S&P 500: Constellation Energy Stock
CEG is up more than 80% in 2024. It is one of the best-performing stocks in the S&P 500 index this year, behind Nvidia and Super Micro Computer.
CEG shares are trading above an official flat-base 198.83 buy point, according to MarketSurge charts. On Feb. 27, when Constellation Energy reported Q4 earnings, CEG shares surged nearly 17%.
Constellation management on Thursday said it will grow base earnings by at least 10% through the decade.
Founded in 1999, Constellation Energy has gone through several phases. After an earlier stint as a public company, it merged with Exelon in 2012 as part of a deal worth roughly $8 billion. While with Exelon, the company's moniker became Constellation Energy Generation. It then split from the utility giant in early 2022.
Constellation Energy owns 25% of U.S. nuclear power reactors. Further, it provides energy to more than 20% of the major commercial and industrial customers in the country.
Nuclear power has declined in recent years, with 13 plants closing since 2013. The industry faces safety concerns about spent fuel rod storage, possible radiation leaks and other environmental issues. The cost of building new nuclear power plants remains cost prohibitive as cheaper and more competitive energy sources — including wind, solar and natural gas — have gained in popularity.
Not Just Nuclear For AI Data Centers
Utility play Vistra joined the S&P 500 index Wednesday morning after the company reported earnings and revenue declines in the first quarter.
VST has gained 140% in 2024 and now accompanies fellow S&P 500 stock CEG as power generation companies looking to capitalize on data centers. Vistra saw first-quarter earnings of 62 cents per share, in-line with expectations and a 45% decline compared to a year ago. VST shares rallied more than 9% on Wednesday.
At the end of the fourth-quarter, Burke named data centers as part of the company's growth plans.
Meanwhile, Chevron Chief Executive Mike Wirth told CNBC on Monday that he expects a surge in natural gas demand driven by escalating electricity needs from artificial intelligence and AI data centers.
U.S. electricity demand is forecast to grow as much as 20% by 2030. AI data centers alone could add about 323 terawatt hours of electricity demand by the beginning of the next decade, according to a recent Wells Fargo analysis. For comparison, New York City's annual electricity consumption about 50 terawatt hours.
Goldman Sachs expects data centers will take up about 8% of total U.S. electricity consumption by 2030.
Enverus estimates that as AI accelerates data center capacity continues to expand, demand for natural gas will increase over the coming years.
"Data centers are among the least sensitive to power prices, in our view, due to the robust economics of the underlying businesses (Big Tech), the ability to pass on costs to consumers and the intense competition among participants to win the AI race," Enverus wrote in a May 1 note.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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