Despite more than doubling over the past year and rising an impressive 555% since the beginning of 2022, nuclear power giant Constellation Energy (CEG) remains the biggest fish in a very precarious pond.
Nuclear energy has long been a controversial sector, but it became a whole different conversation after the rise of artificial intelligence.
Big Tech is exploring nuclear power as a way to meet the energy demands of creating AI platforms, and Constellation Energy has been well-positioned to tap this newfound nuclear use.
So, what's up with the recent sell-off, and what does Microsoft have to do with it?
Has the bottom dropped out?
When news broke this week that Microsoft (MSFT) would cancel leases on its AI data centers, Constellation Energy’s shares dropped 6% as some analysts fretted that the company had become too reliant on the needs and whims of the tech industry.
Not only that, Chinese AI platform DeepSeek has been teasing its ability to operate with significantly less energy than its leading competitors, which could further dampen Constellation Energy’s growth potential.
Microsoft, however, reassured investors that it will still invest tens of billions of dollars in AI infrastructure this year. “While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” the company stated.
Analysts weigh risks and rewards
In spite of the Microsoft-related concerns, Wall Street remains bullish on Constellation Energy. Eleven of the 17 analysts making recommendations on the stock label it a “strong buy,” and the remaining six call it a “hold.”
There's good reason why.
- Its latest adjusted operating earnings report came in higher than the guidance range.
- No other U.S. company comes close to its record as a clean energy provider.
- Constellation Energy also provides solar, wind, and hydroelectric power.
- Earlier this year, it announced plans to acquire Calpine in a $16.4 billion deal.
In Wednesday’s trading session, CEG stock rose by more than 2.2% to just over $270. And with an average target price of $316.44, analysts see the possibility that Constellation Energy’s price will increase another 20% from here.
The company is also asserting that its plan to open the Crane Clean Energy Center in Pennsylvania is still underway—the recent announcement from Microsoft notwithstanding.
With hundreds of employees already hired and hundreds more expected to be added before its planned 2028 launch, Constellation Energy has made its commitment to the project clear.
There are a slew of variables at play when it comes to the future of both AI and nuclear energy, but CES is uniquely aligned at the nexus of both industries—a potentially profitable spot with plenty of downside risk.
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