Freedom Broker: AI power crunch could drag on chip stocks while buoying nuclear names

A shortage of available grid capacity to connect data centers will emerge as a new risk factor that will be discussed repeatedly and is likely to trigger a significant market correction, Freedom Broker argues in its strategic outlook for late 2026 and all of 2027 (seen by Oninvest). Freedom expects the first wave of investor concern to arrive as soon as this winter.

“On the one hand, this will drive interest in every possible source of power like fuel cells, turbines, alternative energy, and so on. On the other hand, it will hit suppliers of AI infrastructure components hard,” Freedom said.

In particular, the shortage of available power capacity, along with risks including major upcoming IPOs by AI labs and efforts to identify the peak of the memory cycle, could trigger sharp local corrections in the semiconductor and semiconductor equipment segment, Freedom warns.

The AI data center boom is already beginning to run up against the limits of the power system. The problem is particularly acute in regions with high concentrations of such facilities: existing generation and grid capacity is not always sufficient to meet rapidly growing demand, while building new power plants, transmission lines, and substations can take years.

The International Energy Agency forecasts that global electricity consumption by data centers will almost double between 2025 and 2030. Morgan Stanley expects even faster growth in the U.S.: data centers’ IT power demand is set to soar 755% by 2029.

Against this backdrop, the largest tech companies are increasingly turning to upgrades of existing plants. They are cheaper and quicker than building new plants or deploying next-generation technologies such as small modular reactors, which remain unproven at commercial scale, CNBC writes.

The latest example is Google’s 20-year agreement with Constellation Energy, the largest U.S. nuclear operator, to purchase electricity for data centers. The deal calls for upgrades to 11 reactors at six operating plants, increasing their combined capacity by 890 megawatts. Constellation shares surged 12.2% on Tuesday, which made the stock one of the S&P 500’s three biggest gainers. Last week, Constellation also reached an agreement with Amazon to add 190 megawatts of capacity at Calvert Cliffs, Maryland’s only nuclear power plant, CNBC reports.

“This is exactly the kind of nuclear growth investors should want to see... high-quality, low-risk growth that enhances earnings visibility, de-risks the company’s capital deployment strategy, and reinforces confidence in how CEG plans to invest its significant cash flow,” Seeking Alpha quotes KeyBanc analyst Sophie Karp as saying.

The news validates a key pillar of her bullish case for the stock, Karp wrote. “While broader power market reforms remain subject to debate and an overhang on the sector, CEG’s ability to execute throughout this uncertainty is a clear positive for our bullish view on the company and the sector more broadly.”

The agreement is also positive for other independent power producers with nuclear plants that could be candidates for upgrades, Evercore ISI analyst Nicholas Amicucci said. On Monday, Vistra received a conditional loan commitment of up to $4.2 billion from the U.S. Department of Energy to increase output at its nuclear plants, while its shares were also lifted on Tuesday by news of the Google-Constellation Energy deal. Vistra is up 16% over the last five days.

Other power producers also gained on Tuesday, including Talen Energy (up 12.4%) and NRG Energy (up 7%). Tech giants’ deals to upgrade nuclear plants are also positive for uranium enrichers, including Centrus Energy, because of the resulting increase in fuel demand, the Evercore analyst argues. Centrus shares jumped more than 7% on Tuesday.