Amazon Just Signed a 20-Year Nuclear Power Deal. Here's the 1 Industrial Stock That Benefits Most.
Key Points
Led by the ongoing proliferation of AI data centers, demand for nuclear power is firming up.
Although one utility name is better-positioned to benefit, it isn’t necessarily the best way for investors to capitalize.
One underappreciated way to plug into this opportunity hides in plain sight.
If there were any doubt that AI data center owners/operators are serious about using nuclear power to shore up their energy supply, Alphabet and Amazon just erased it.
Last week, the e-commerce powerhouse made a 20-year commitment to purchase electricity from Constellation Energy's (NASDAQ: CEG) Calvert Cliffs Clean Energy Center in Maryland. Then, early this week, Google's parent company Alphabet made a separate-but-similar 20-year deal with Constellation to purchase nuclear-generated power from 11 different facilities in Illinois, Pennsylvania, and New Jersey.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Read between the lines: The tech industry knows that nuclear energy will feature prominently in its future mix of power sources, largely because it's proven, scalable, and ready to go right now.
Image source: Getty Images.
Constellation is obviously well-positioned to benefit from this tailwind, in that it already generates about 80% of the nation's nuclear power output. That doesn't necessarily make its stock the top bet for interested investors.
CEG shares have more than tripled in value over the past three years in anticipation of this swell of demand. The result is an unusually expensive utility stock with little dividend yield.
The best way of plugging into this trend, rather, is arguably Cameco (NYSE: CCJ), which supplies the low-enriched uranium-235 required by most modern nuclear power facilities. Although the sales and consumption cycle of uranium-235 is relatively slow, the World Nuclear Association believes the nuclear energy industry's total power output could triple between now and 2050, with the ramp-up unlikely to materialize in earnest until 2030 as several dozen new nuclear power plants currently under construction come online. Others will begin construction in the meantime.
The kicker: Cameco owns 49% of Westinghouse, which supplies half of the world's nuclear energy industry with equipment and technology, including reactors.
Cameco shares jumped in response to the news of Alphabet's power purchase agreement with Constellation, by the way. Even so, the stock's still about 35% below analysts' consensus target price of $125.75. That's not a bad way to start a new trade.
James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Cameco, and Constellation Energy. The Motley Fool has a disclosure policy.