Shares of Constellation Energy (CEG +12.25%) rallied 11.4% on Tuesday as of 3:25 p.m. EDT.
Constellation made news today after inking a huge deal with Alphabet (GOOG +0.22%) (GOOGL +0.35%), under which Constellation will upgrade and expand its nuclear power capacity to the PJM power grid, supplying more of Alphabet's AI data centers in that area.
NASDAQ: CEG
Key Data Points
Alphabet to help upgrade Constellation's nuclear power units
Today, Alphabet and Constellation signed a comprehensive power purchase agreement that will enable Constellation to supply additional nuclear power to the PJM electricity grid, which stretches from the mid-Atlantic region to Illinois, and fuel Alphabet's fast-growing AI data center footprint in those areas.
There are multiple parts to the deal. First, Alphabet signed a 20-year, 890-megawatt (MW) power purchase agreement with Constellation, which will enable Constellation to invest an additional $4.3 billion to boost capacity from its nuclear units in Illinois, Pennsylvania, and New Jersey.
On top of that, Alphabet signed a 15-year, 2,700-MW PPA with Constellation for additional power from the PJM grid, extending the useful life of existing power assets. Constellation also signed a five-year deal with Google Cloud, under which Constellation will use Gemini Enterprise, Alphabet's enterprise AI offering, to enable lower-cost, efficient power production across its footprint.
Constellation CEO Joe Dominguez noted in the press release:
This long-term clean energy collaboration with Google can serve as a model for how technology companies and the energy industry can work together to responsibly develop the digital economy and invest in our nation's energy infrastructure in a way that delivers gridwide benefits for all, funded by private entities.
Image source: Getty Images.
Turning down the heat
The rapid expansion of AI data centers across the U.S. has sparked political backlash and raised concerns among some AI investors over the summer. However, it appears that at least some of those concerns, specifically about pollution and higher electricity costs for consumers, are mitigated by deals like this.
Alphabet is paying its own way in this case, relieving consumers from the burden of Constellation's expansion, and is also contributing AI tools to help lower costs and bring on more carbon-free energy to the grid.
This is perhaps part of why Berkshire Hathaway chose Alphabet as its big AI bet and participated in Alphabet's June equity offering to raise nearly $85 billion. Well-funded tech giants have the capacity to invest in AI data centers and also help mitigate the environmental and cost concerns that accompany them. So perhaps for all the focus on the newer AI labs that may go public soon, it may very well be deep-pocketed tech giants like Alphabet, which can shoulder more of the cost burden, that will thrive in the agentic AI age.
