A way for energy investors to ride the AI boom

livemint.com:

Investors looking to ride the artificial-intelligence wave have turned their eyes to a sleepier corner of the market—companies that own and operate power plants. Is the run-up justified? AI hype has helped lift Vistra stock 85% year to date. That falls short of Nvidia’s eye-watering 92% surge, but is far greater than the 12% lift that Microsoft has seen over that time.

Constellation Energy, the owner of the U.S.’s largest fleet of competitive nuclear generation capacity, has rallied 60% year to date, while NRG Energy is up 32%. U.S. electricity demand has been relatively flat since 2010, thanks to energy efficiency.

Now, the prospect of data-center growth due to AI, as well as a Chips Act-driven nearshoring of manufacturing and the electrification of things like heating and transportation, are expected to drive electricity demand growth. McKinsey, BCG and S&P Global Commodity Insights all project electricity demand tied to data centers to increase at a compound annual growth rate of between 13% and 15% through 2030. PJM Interconnection, whose jurisdiction includes data center-heavy Virginia, expects total electricity demand to grow at an annual rate of 2.4% over the next 10 years, up from its year-ago forecast of 1.4%.

This comes as the U.S. power market has been tightening for seven straight years, notes Steve Fleishman, equity analyst at Wolfe Research. Meanwhile, the time it takes for new capacity to go from the planning stage to commercial operation has only gotten longer as grid operators face long backlogs.