Few topics have been as widely discussed in recent years as artificial intelligence (AI). It has taken over the tech world, the business world, and seemingly everything in between. The many companies with their hands in the AI pot all rely on one core thing: data centers.
Data centers are the backbone of AI, but demand for what they can provide is being far outweighed by electricity needs. This isn't the best news for AI hyperscalers (companies that operate large cloud platforms), but it's working in favor of the following two companies.
Image source: The Motley Fool.
1. Constellation Energy
Hyperscalers need two things: 24/7 access to massive amounts of power and power that is as green as possible. That's where Constellation Energy (CEG -0.01%) comes into the picture. Constellation is a clean energy company with the largest nuclear power fleet in the U.S.
Nuclear power is a good go-to because energy sources like natural gas emit carbon emissions, and it's not feasible to expect that much 24/7 power from wind or solar. Nuclear power, on the other hand, is carbon-free and can run continuously.
NASDAQ: CEG
Key Data Points
If you want to see just how much nuclear energy is in demand, look no further than Constellation's 20-year power purchase agreement with Microsoft (MSFT +0.43%). As part of the deal, Microsoft is restarting the Three Mile Island nuclear facility (now called the Crane Clean Energy Center) in Pennsylvania, with Constellation supplying the plant's energy.
Microsoft's willingness to sign a two-decade agreement underscores the importance of long-term, reliable energy sources for hyperscalers. They're spending hundreds of billions building data centers, but they're only useful if there's enough power to run them. Although the stock is down over 25% year to date through Aug. 20, it presents a better buying opportunity for long-term investors.
2. GE Vernova
GE Vernova (GEV -0.95%) doesn't focus on the electricity that data centers need. Instead, it focuses on the hardware required to generate and distribute power.
NYSE: GEV
Key Data Points
Demand for GE Vernova's hardware has surged due to data center build-outs. Through the first half of this year, data center power equipment has generated $5 billion for the company, more than double what it brought in all of last year.
GE Vernova is a good way to get exposure to the infrastructure portion of the AI build-out. It's one of the go-to hardware suppliers, solidifying its place in the power supply chain. And with a backlog of $176 billion, it has guaranteed future revenue that essentially provides a floor for its top line.
Some investors may worry the rally is over, given the stock is up over 42% this year and 194% since the start of 2025. However, it's still in a strong position to produce good long-term results. Expect higher-than-usual volatility, though. That has been a common theme over the past year.
