Constellation energy (CEG) reports first-quarter earnings and sales early Thursday. Analysts expect EPS growth of 400%. Investors may be even more focused on how artificial intelligence (AI) data centers will drive demand for the company.
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Constellation Energy’s earnings are expected to rise 417% to $1.50. Sales are expected to rise 9% to $8.23 billion in the first quarter. But even more than earnings growth, analysts are keeping an eye on whether Constellation, the largest nuclear power plant operator in the U.S., announces long-term contracts to set up AI data centers at its nuclear power plants.
Amid the AI gold rush, companies are hungry for the energy needed to run data centers. The data centers, in turn, act as training and distribution centers for the machine learning that drives AI.
Nuclear power is one such answer.
Morgan Stanley analyst David Arcaro expects the conference call to focus “on the possibility of signing long-term data center contracts at the company’s nuclear power plant sites,” according to an April 29 note.
Arcaro added that negotiations have progressed in recent months. He expects Constellation Energy could sign contracts as early as the third quarter.
“Discussions with large hyperscalers have progressed to a site-level review, and management has previously indicated that potential deals could be possible in months, not years,” the Morgan Stanley analyst said. The top hyperscalers – the largest cloud, data center and AI providers – include: Amazon.com‘s (AMZN) AWS, Microsoft (MSFT), Meta (META) and alphabet (GOOGL).
In March, Talen Energy announced the sale of a 960-megawatt data center campus to AWS for $650 million, located at its nuclear power plant in Pennsylvania.
S&P 500: Constellation Energy stock
Constellation Energy shares rose 1.5% to 200.56 in Tuesday trading, surpassing a buy point. CEG is up 69% in 2024. It is one of the best-performing stocks in the S&P 500 index this year Nvidia (NVDA) and Super microcomputer (SMCI).
According to MarketSurge charts, CEG shares are trading around the official buy point of 198.83. When Constellation Energy reported fourth-quarter results on Feb. 27, CEG shares rose nearly 17%.
Constellation Energy was founded in 1999 and has gone through several phases. After previously operating as a publicly traded company, the company merged with Exelon in 2012 in a deal valued at approximately $8 billion. During his time at Exelon, the company’s nickname became Constellation Energy Generation. It then separated from the utility giant in early 2022.
Constellation Energy owns 25% of US nuclear reactors. It also supplies energy to more than 20% of the country’s major commercial and industrial customers.
Nuclear power has declined in recent years, with 13 power plants closing since 2013. The industry faces safety concerns about spent fuel storage, possible radiation leaks and other environmental issues. The cost of building new nuclear power plants remains prohibitive as cheaper and more competitive energy sources – including wind, solar and natural gas – become increasingly popular.
Not just nuclear for AI data centers
Assistive play view (VST) reports first-quarter results on Wednesday. On the same day it will be included in the S&P 500 index. Vistra shares have gained 116% in 2024.
At the end of the fourth quarter, Vistra CEO Jim Burke cited data centers as part of the company’s growth plans. He said nuclear power plants are not always necessary to power technology centers.
“They actually maintain gas facilities for behind-the-meter opportunities,” Burke said.
In the meantime, Chevron (CVX) CEO Mike Wirth told CNBC on Monday that he expects a surge in natural gas demand driven by increasing power needs from artificial intelligence and AI data centers.
Electricity demand in the US is forecast to increase by up to 20% by 2030. According to a recent Wells Fargo analysis, AI data centers alone could increase electricity demand by approximately 323 terawatt hours by the start of the next decade. For comparison, New York City’s annual electricity consumption is about 50 terawatt hours.
Goldman Sachs expects data centers to account for about 8% of total U.S. electricity consumption by 2030.
Enverus estimates that demand for natural gas will increase in the coming years as data center capacity is accelerated by AI.
“Data centers, in our opinion, are among the least sensitive to electricity prices because the underlying companies (Big Tech) are resilient, costs can be passed on to consumers, and there is 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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