Shares of utility companies riding the AI boom

Want to make a wager on the future of artificial intelligence (AI)? Nvidia is the obvious bet. It designs the chips and software that make AI run, is the stock market favourite and has gained 144 per cent in 2024 alone.

- Jeff Sommer

But some stock traders have found a less obvious, backdoor choice: utility shares, specifically those of companies that own nuclear power plants.

Two such companies Constellation Energy and Vistra have been top performers in the S&P 500 in September, with returns of more than 30 per cent.

Shares of Constellation Energy, the biggest nuclear plant operator in the United States, surged when it signed a deal on Sept 20 to supply Microsoft's burgeoning AI data centres with energy from the Three Mile Island nuclear power plant near Harrisburg, Pennsylvania.

If you were a consumer of news in 1979, or are aware of the history of nuclear power, you will know that Three Mile Island was the site of the worst nuclear disaster in US history. Now, because of AI energy demand, the utility intends to reopen an undamaged part of Three Mile Island that was mothballed five years ago and change its name, to the less evocative Crane Clean Energy Centre.

Vistra says it, too, has been in talks with several AI operators.

And the Constellation deal with Microsoft followed an AI-nuclear power agreement in March involving Talen Energy and Amazon. Talen agreed to sell Amazon large quantities of electricity from the Susquehanna Steam Electric Station - a nuclear plant near Berwick, Pennsylvania, in which the utility has a 90 per cent ownership stake.

Consider these stock returns for the year, including dividends:

The S&P 500 stock index, 22 per cent Constellation Energy, 121 per cent Vistra, 208 per cent Talen Energy, 185 per cent Other utilities have got a boost from AI too, but generally not as spectacularly as these companies.