The power sector's impressive rally, fueled by the surging demand for electricity from artificial intelligence, is likely just beginning. Analysts predict that three stocks in particular, Constellation Energy, Vistra Corp., and Talen Energy, are well-positioned for further growth in 2025. These companies experienced significant value increases in 2024 as investors recognized the high demand for their nuclear and gas assets from tech companies constructing data centers to support AI development.
Vistra has more than tripled in value, becoming the second-best performing stock in the S&P 500 this year, surpassing even chip giant Nvidia. Constellation has nearly doubled, ranking as the 10th best performer, while Talen Energy, not yet an S&P member, has also tripled in value. Experts believe this rally is in its early stages, with substantial growth potential as tech companies continue to scale up their AI operations. While the companies have already secured some power agreements with data centers, analysts expect to see more contracts signed in 2025. Constellation announced a deal to restart the Three Mile Island nuclear plant in partnership with Microsoft, and Talen agreed to power an Amazon data center using electricity from its Susquehanna nuclear plant. However, Vistra, the top performer among the three, has yet to announce any similar agreements. Investors anticipate that Vistra and Talen will start securing more contracts in 2025 to capitalize on this growing demand
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