A clever strategy in the AI energy race is Constellation Energy

For investors wishing to integrate AI into their portfolios, Constellation Energy presents a strong opportunity

Is it wise to purchase its shares?

Constellation Energy, a £90 billion company based in Baltimore, produces electricity on a massive scale. Additionally, because of AI's ravenous appetite, electricity is now a highly valuable commodity, and businesses that can produce it consistently, sustainably, and on a large scale will receive far more attention than they do now.

Because they believe AI will revolutionize the world economy, investors have revalued entire industries. Although data centers, chips, and AI models are all worthless without power, electricity receives less attention. Large data centers use massive amounts of power to train and operate ever-more-powerful models. Air conditioning systems, semiconductor plants, battery manufacturers, electric cars, industrial reshoring, and electrification in general are all moving in the same direction.

Use Constellation Energy to take advantage of the great electrification.

At a time when hyperscalers are looking for dependable and affordable power, Constellation Energy (Nasdaq: CEG) has the most nuclear power plants and the largest fleet of reactors in the United States. Constellation's appeal as a long-term growth stock can be explained by investors' growing perception of the company as the owner of valuable infrastructure rather than a utility.

Constellation Energy (Nasdaq: CEG) share price chart.

Currently, 10% of the clean energy produced in the US comes from Constellation Energy. About 27 million US homes could be powered by the electricity it generates. It is the biggest nuclear energy company in the nation, and its power plants coexist with a fleet of oil-fired, gas, hydro, wind, solar, and geothermal resources. 55 gigawatts (GW) are produced by these.

To put that in perspective, the National Energy System Operator reports that the UK's recent winter peak demand for electricity was usually around 60GW. 80 of the 100 largest companies in the US by revenue are among Constellation's 2.5 million customer accounts.

First-quarter sales increased 64% year over year from £6.8 billion to £11.1 billion, according to May results. Although impressive, about £2£3 billion of that came from the purchase of Calpine, a generator of mostly gas and geothermal power. Over the course of 2025, Constellation Energy brought in about £25 billion. The quarter's earnings per share of £2.74 exceeded analysts' projections by 14 cents and was up 28% year over year.

For nearly the whole time, the company's nuclear fleet produced electricity at nearly full capacity, achieving an exceptional 92.3 percent capacity factor. The hyperscalers' demand isn't slowing down, according to management, and anticipated spending levels will keep rising to meet the expanding demand for computer processing.

The management has confirmed that it expects earnings per share in 2026 to be approximately £11, up from £9.39 and £8.67 in 2025 and 2024, respectively. Through 2029, it hopes to achieve yearly earnings per share of at least 20 percent, driven by increased demand and higher prices, including better long-term contracts.

For 2027, analysts have set a target of £13.50. Their target share price for the next 12 months is £362, which is roughly one-third higher than it is now. Of course, current generation capacity may prove to be far more valuable than investors currently believe in a world where electricity is desperately needed.

Avoid chasing after chips.

It's interesting to note that investors can now purchase a business that is predicted to increase earnings by more than 20 percent per year at a valuation that is roughly comparable to the market as a whole. Investors are typically required to pay a high premium for this combination of strategic importance and growth. For companies that use a lot of processing power, the market is willing to pay higher valuations. However, companies that sell the enormous amounts of electricity that enable such computing both now and in the future are of far less interest to it. There is a chance if you look past that "utility" label.

The first criticism is that there is no shortage of electricity. The power generators can increase their capacity if demand increases. However, planning approval, numerous environmental assessments, funding, engineering know-how, political backing, and years of building are all necessary for new power plants. Transmission networks then require modernization.

The nuclear fleet of Constellation Energy becomes especially intriguing at this point. Technological moats are a topic that investors discuss extensively. A collection of fully functional nuclear reactors, however, might be the most formidable barrier to entry. The market's increasing interest in Constellation Energy is a reflection of a straightforward fact: it already has extensive, connected, and cleanly operating electricity infrastructure. It is feasible to build more, but it will take time to do so.

As of yet, no one can predict with certainty which business will lead the AI space. But it's already obvious that the modern economy needs a lot more electricity. Investors have been chasing chips during the initial stages of the AI boom. Those who are pumping the power might own the second phase. Rather than taking a chance on the final winners of the AI race, investors might find it simpler to support the latter.