S&P 500 nuclear energy giant Constellation Energy jumped early Thursday, leading the S&P 500 and the Nasdaq 100, after receiving a stock upgrade. CEG shares have climbed around 99% higher in 2024.
Bank of America upgraded Constellation Energy stock to a buy rating, up from its previous neutral view, and hiked its price target 269 from 237. The firm wrote that Constellation Energy is in "the best position to prosper" amid rising energy demand and a desire from major hyperscalers to ink deals with nuclear power for AI data centers.
The analysts added that there could soon be some regulatory clarity on placing data centers at nuclear power plants, which is not reflected in the current CEG stock price.
CEG stock advanced 2.9% to 243.46 during market action on Thursday, leading the S&P 500 and the Nasdaq 100 indexes early Thursday. CEG jumped 1.8% to 236.60 on Wednesday, but shares are down 7.8% in December.
The stock hit an all-time high of 288.75 on Oct. 7. The stock has retreated 18% since then, but still sits on a 99% gain in 2024.
Constellation Energy owns 25% of U.S. nuclear power reactors. The company reported better-than-expected third-quarter earnings and revenue while narrowing its 2024 profit expectations in November.
AI And Nuclear Energy
So far in 2024, nuclear power and utility stocks have been riding the artificial intelligence energy wave.
Artificial intelligence — and the data centers powerful enough to allow them to 'train' themselves — are expected to boost energy demand throughout this decade. In the U.S., McKinsey & Co. projects that data center energy demand will grow from around 4% currently, as percentage of total energy demand, to 11%-12% by 2030.
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Many technology companies are investing in or partnering with nuclear power providers to ensure energy supplies for their data centers.
Nuclear energy-related stocks surged in October following Constellation Energy's announcement on Sept. 20 of a two decade contract with Microsoft to provide nuclear power for the tech giant's data centers.
CEG shares are now up 13% since the deal was announced.
In October, Amazon.com and Alphabet also announced decisions to invest in developing the emerging small modular reactors, or SMRs, technology. No operating SMRs currently exist, but there are a number of companies developing the technology.
Oracle also announced plans in September to build a gigawatt-scale data center powered by three SMRs.
Constellation Energy stock has an 81 Composite Rating out of a best-possible 99. The S&P 500 stock also has a 90 Relative Strength Rating and a 55 EPS Rating.
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