Big tech has a big issue: Its data centers consume colossal amounts of power, and not all of it is clean.
Electricity demand in the U.S. is expected to grow about 25% by 2030, from 2023 levels, and 78% by 2050.
Enter Constellation Energy (CEG 3.96%). As the country's largest producer of carbon-free electricity, as well as its biggest provider of nuclear power, Constellation is at the center of solving this big-tech issue. The company's stock is up over 48% so far this year, and by the looks of it, it could be poised for more growth ahead. It's one of the best energy stocks bo buy right now.
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The bull case for Constellation Energy
When you think of utilities stocks, you may think of slow growth and dividends. But Constellation is anything but normal.
Unlike most utility companies, Constellation Energy isn't regulated. That means it sells power at market price rather than fixed, government-approved rates. When demand for electricity is high, Constellation can benefit directly. And right now, demand is booming.
Better yet, demand for clean energy is booming, which is Constellation's bread and butter. The company owns the country's largest carbon-free fleet, mostly nuclear. That has helped it lock into strategic supply agreements with big tech companies like Meta Platforms and Microsoft.
Most of Constellation's carbon-free power comes from its nuclear facililites, which has about 22.2 gigawatts of capacity. That makes Constellation not only the leader in nuclear capacity in the U.S., but also positions it nicely to profit from the AI boom, as data centers need reliable, 24/7 power.
The company's recent $26.6 billion acquisition of Calpine could also add about 25 GW of gas capacity. Management expects the deal to add about $2 billion in free cash flow per year.
Is it a buy now?
That said, Constellation trades at about 32 times forward earnings estimates, or roughly double the average multiple for the energy sector. For investors betting on the next decade of energy growth, however, it's hard to find a better energy stock to plug into.
