By the end of this century, it is expected that data centres will use up to 160% more electricity due to the rapid growth in artificial intelligence.
According to Guggenheim analyst Shahriar Pourreza, power stocks are well-positioned to gain from this massive increase. These include Constellation Energy Vistra Corp and Talen Energy.
He has already mentioned that all three stocks in his recent note will close this year at record levels. Pourreza, however, is convinced that the rally is only in its initial phase.
Constellation Energy Corp. (NASDAQ: CEG).
Constellation Energy’s stock is up by about 100% since the beginning of 2024.
Shahriarpourreza still sees Constellation Energy as having more upside next year, as he anticipates a massive increase in power demand due to tech companies continuing to scale up AI.
Constellation Energy’s nuclear assets could be a major attraction for artificial intelligence companies, who may sign similar agreements with Constellation Energy to the one Microsoft signed in September.
Guggenheim estimates that the CEG stock could reach $328 by 2025 as a result of the financial boost.
Constellation Energy, a company that invests in energy, offers 0.61% additional dividend yield.
Talen Energy Corp (NASDAQ: TLN)
Talen, like Constellation Energy has a power agreement with Amazon.com Inc. that has contributed to its 300% gain year-to date.
Guggenheim analyst believes that despite the extraordinary rally, Talen Energy is not particularly costly to own given the significant increase in power demand expected in 2025.
He sees TLN a way to gain exposure to an AI market that is expected to grow at a rate of over 28% annually through the end of the decade.
Shahriar Pourreza’s $246 price target for Talen shares represents a 25 percent increase from the current level. Talen Energy, unlike CEG, does not pay a dividend at the moment.
Vistra Corp (NYSE: VST)
Vistra Corp is the stock that has performed best this year among those recommended by Guggenheim for 2025.
It’s actually the best-performing S&P 500 Company in 2024.
The shares of the Texas-based company have more that tripled in the past 12 months, but are still cheaper than Constellation Energy.
Shahriar Pourreza believes that AI companies are interested in the company’s gas and nuclear assets.
“I like Vistra, because I don’t need to guess whether the next deal will be a nuclear or gas plant.”
In his report, he named Vistra stock as his top pick for the year 2025.
Pourreza’s $177 target price indicates that VST could rise another 26% from current levels.
Vista pays an additional dividend yield of 0.61%.
This post Top 3 power stock that will benefit from AI in 2025 may change as new information is released.
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