For the past three years, investors have been obsessed with one question: Who will win the artificial intelligence (AI) race?
Most of the attention is on familiar names. Nvidia Supply chips. OpenAI builds the model. microsoft, alphabet, Amazonand meta platform We’re spending billions of dollars building the infrastructure needed to power AI.
At first glance, the competition seems simple. It’s about building better chips and models and bigger data centers.
But a surprising problem is emerging. Some of the world’s largest technology companies are realizing that having enough AI chips may not be enough. They also require large amounts of electricity.
And that reality is quietly changing the economics of the entire AI industry.
Image source: Getty Images.
Microsoft’s surprising move
One of the most important developments in AI over the past few years didn’t come from a new chatbot or breakthrough chip. It was from the energy sector.
In late 2024, Microsoft signed a long-term agreement to restart the Three Mile Island reactor. Three Mile Island is best known for the 1979 nuclear disaster that changed the public’s perception of nuclear energy in the United States.
One of the world’s most valuable technology companies is helping restart nuclear reactors. why?
Because Microsoft has long understood what many investors are finally starting to realize. The future of AI depends on both computing power and electricity.
Today’s changes
(-3.64%) $-9.62
current price
$254.97
Key data points
Market capitalization
$92 billion
daily range
$253.72 – $261.66
52 week range
$243.30 – $412.70
volume
213.9K
average volume
3.3M
gross profit
13.18%
dividend yield
0.64%
AI has a huge desire for power
All AI interactions require power. When you ask ChatGPT a question, generate an image, or use our AI-powered search engine, thousands of computers in our massive data centers work together to generate a response.
These facilities consume enormous amounts of energy. As AI models become more capable and widely used, the demand for electricity continues to increase. This creates challenges that many investors did not anticipate.
Building more chips and data centers is difficult. But building new power plants may be even more difficult. New power plants often require years of permitting, environmental reviews, regulatory approvals, and construction before they can begin producing electricity.
This is a problem because the demand for AI is increasing today. Without power, even the most advanced AI chips would be expensive silicon.
Introducing Constellation Energy
Most investors have probably never heard of constellation energy (CEG 3.64%). The company does not build AI models, manufacture semiconductors, or sell software. Rather, it is America’s largest producer of clean, reliable energy and owns the largest nuclear power plant.
At first glance, it might not sound all that exciting. However, in today’s environment, these assets may become increasingly valuable.
Nuclear power provides what AI companies desperately need: large amounts of reliable, 24-hour power. As demand for data centers increases, many experts believe the power grid will require a combination of energy sources, including nuclear power, natural gas, renewable energy, and battery storage.
Constellation’s advantage is that it already has the largest operating nuclear power plant in the United States. This gives businesses options as power demand increases from their data centers. For example, Constellation Energy may sell power to high-value customers, including data center operators, through direct long-term contracts, similar to the contract it entered into with Microsoft to provide power from Three Mile Island.
So while most investors still view the company as a utility, Constellation Energy sits at the intersection of two powerful trends: rising electricity demand and the rapid expansion of AI.
Critical infrastructure owners are often the biggest winners during times of major economic transformation, so Constellation Energy could be a winner in this AI transformation.
What does that mean for investors?
In many ways, Constellation is more of a bet than nuclear power that electricity will be one of the most precious resources of the AI era.
It remains to be seen whether Constellation Energy will ultimately be a successful investment. The stock has already attracted a lot of attention from investors, and expectations for future growth are much higher than they were a few years ago. This explains why the stock price has increased nearly 600% over the past five years.
Still, investors should be wary of the stock. At the end of the day, one of the most important questions AI investors should focus on over the next decade is simple. “Who will provide the electricity?”
In the US, Constellation Energy continues to hold the top spot.
