Meta will purchase energy from nuclear power plants. This may become a growth driver for the nuclear industry

Meta Platforms, which owns social networks Instagram and Facebook, has entered into a power purchase agreement with Constellation Energy, the largest operator of nuclear power plants in the US. This is Meta's largest energy agreement with an operating reactor operator and could give a new boost to the entire nuclear energy industry. Previously, investors avoided the sector, but now it is experiencing a renaissance: amid the AI boom, bigtechs need more and more electricity to run data centers. The news triggered a rally in energy stocks.  

 Meta Platformshas signed a 20-year nuclear power supply contract with Constellation Energy. Under the terms of the deal, the company will begin purchasing about 1.1 gigawatts of power starting in June 2027 from the Clinton Clean Energy Center, a Constellation plant in Illinois that had previously been threatened with closure due to a rebate program for carbon-free power generation expiring that year.  

The contract is Meta's largest energy deal, according toaccording to Urvi Parekh, head of Meta's global energy unit. The agreement will allow the company to maintain its commitment to cover 100% of its electricity consumption with clean energy. For Constellation Energy, it could be a deciding factor for it to start building a new reactor, said CEO Joe Dominguez.

Financial details of the deal were not disclosed. Jefferies analyst Paul Zimbardobelieves that it could be cheaper for Meta than Constellation's similar deal with Microsoft. By his calculations, Meta will pay the Clinton station about $80 per megawatt/hour, while Microsoft will pay at least $110 per megawatt/hour. This difference may be due to the fact that in the case of Microsoft Constellation had to restart the reactor, while Meta made a deal with an already operating reactor.

Quotes of Constellation Energy in trading on June 3, first jumped by 9% - to a maximum of more than four months, but then lost all the growth. Since the beginning of the year, the company's market value has increased by 40%.

Constellation Energy has unexpectedly turned out to be one of the main beneficiaries of the AI boom on Wall Street, notes Forbes. Since OpenAI's ChatGPT launched at the end of 2022, the stock has brought investors a return of more than 230%, the publication adds. By comparison, the main U.S. stock index, the S&P 500, has added 51% over the same period. Constellation ranked 16th among all S&P500 companies by this indicator, ahead of even the more obvious, at first glance, beneficiaries of the AI boom like Amazon, Alphabet (owner of Google), Microsoft, Oracle and Tesla.

The news about the deal between Constellation and Meta also spurred the growth of quotations of other companies related to nuclear energy. For example, the securities of uranium mining companies Uranium Energy, Energy Fuels and Centrus Energy soared by 7-14% each. Shares of nuclear power company Vistra rose more than 5%, and GE Vernova rose about 2%.

The value of shares Meta was almost unchanged on Tuesday. Since the beginning of the year, the company's securities have risen by 14%.

This is the first such deal with an independent power producer at an operating facility and could be a major growth driver for the entire energy industry, according to Paul Bell, senior equity trader at Mizuho. "This is exactly what everyone has been waiting for," emphasized Bell, whose words arequoted by Barron's.

"Nuclear power, once considered a pariah and written off, is experiencing a renaissance - fueled by the insatiable energy appetite of artificial intelligence and a growing recognition that additional energy sources will be needed to offset the instability of solar and wind generation," said Yardeni Research founder Ed Yardeni, whose words were quoted by Forbes.

Recently, the amount of electricity consumed by tech giants has increased significantly - mainly due to an aggressive AI race and active build-out of data center capacity. The bigtechs' annual environmental reports show that Microsoft's carbon dioxide emissions have increased by 30% and Google's by nearly 50% compared to previous years, Bloomberg notes. OpenAI (ChatGPT's parent company) CEO Sam Altman and other tech leaders have warned that without breakthroughs in energy, there simply won't be enough resources for AI breakthroughs. Against this backdrop, in late May, Donald Trump alsosigned a series of executive orders aimed at accelerating the construction of nuclear power plants.

As a result, nuclear energy has become one of the main beneficiaries of the AI boom, Bloomberg notes. For example, eight months ago, Microsoft too entered into a similar agreement with Constellation Energy to supply energy from the Three Mile Island nuclear power plant in Pennsylvania. Amazon and Google, for their part, are investing in small modular reactors, and Sam Altman stepped down as chairman of his energy company Oklo so it could partner with OpenAI.