Constellation powers up

The AI boom has an insatiable appetite for electricity, and Constellation Energy is more than happy to keep it fed.

The country’s largest nuclear power producer delivered a blowout third-quarter earnings report today, with revenue soaring 45% to $9.55 billion and adjusted earnings jumping 66% to $5.06 per share, comfortably beating Wall Street’s expectations. The company also raised its full-year profit outlook for the second time this year, thanks partly to favorable electricity-market conditions and its acquisition of natural-gas power producer Calpine in January.

The company has also been locking in nuclear power agreements with tech giants looking to secure electricity for their growing AI operations:

• Amazon: Signed a 20-year agreement for 690 megawatts of nuclear power in September, supporting more than $3 billion in investments at Constellation’s Maryland facility, including an expansion expected by 2032.
• Google: Struck a 20-year deal in October supporting more than $4.3 billion in nuclear investments across 11 reactors, which are expected to add roughly 890 megawatts of capacity to the grid.

“The new megawatts, which are the equivalent of a new large-scale nuclear plant, are coming online with no costs being borne by existing customers,” CEO Joe Dominguez said in a press release. Shares gained 10.44% today.

A power struggle

But Wall Street hasn’t been nearly as enthusiastic about power stocks lately. Constellation shares are down more than 21% this year, and its sector took another beating last week after Democratic victories in the midterm elections raised concerns about restrictions on data center construction. In fact, lawmakers are already weighing a bipartisan bill that would require large data centers to shoulder more of the costs of upgrading the power grid.

According to Goldman Sachs, states where data center development could face new restrictions account for about 45% of planned US capacity, with Texas alone representing roughly 25%.

Still, some analysts think investors are overreacting. Morgan Stanley called the selloff overdone, arguing that restrictions could delay individual projects without derailing the broader investment boom. Evercore also pointed out that Constellation’s long-term contracts are expected to cover 45% of its clean baseload generation by 2032, giving it more predictable revenue even if new data center construction slows.

For investors, that’s another bright spot amid all the political uncertainty and market jitters—and a reason to think twice before pulling the plug.—SY