Tech Giants Bet Big on Nuclear Power with Constellation Energy Deals
Alphabet Inc. (NASDAQ:GOOGL) and Amazon.com Inc. (NASDAQ:AMZN) have both signed 20-year agreements with Constellation Energy Corp. (NASDAQ:CEG) to add new nuclear power capacity to the PJM Interconnection grid. Google's deal, announced on Tuesday, will add 890 megawatts of new nuclear capacity, while Amazon's agreement, signed six days earlier, adds 190 megawatts. Together, these contracts fund 1,080 megawatts of new power, addressing about 16% of the 6,831 megawatt shortfall identified by PJM after its latest capacity auction.
Constellation shares surged 8.4% to $289.98 in premarket trading following the announcement, and nuclear stocks rallied with it. Despite this jump, CEG shares are still down 17.9% for the year. The hesitation among investors may stem from the long timelines involved. Google's first uprate is expected by 2028, while Amazon's could take until 2032. Meanwhile, the restarted Three Mile Island reactor, part of a deal with Microsoft Corp. (NASDAQ:MSFT) signed in September 2024, may not reconnect until 2031.
The deals rely on so-called uprates, which involve upgrading existing reactors to produce more electricity. Amazon's agreement covers 690 megawatts from the Calvert Cliffs Clean Energy Center in Maryland, including a 190-megawatt uprate and more than $3 billion in investment. Google's deal funds uprates at 11 reactors in Illinois, Pennsylvania, and New Jersey, with over $4.3 billion in new investment. Google also signed a 15-year supply agreement covering 2,700 megawatts from Constellation's existing PJM fleet.
Constellation's CEO Joe Dominguez called the collaboration with Google a model for how technology companies and the energy industry can work together. However, the stock remains 29.7% below its 52-week high of $412.70. Analysts have an Overweight consensus rating on Constellation, with an average price target of $349, suggesting about 20% upside from the premarket price. Despite recent target cuts from several firms, Bernstein analyst Sunaina Ocalan maintained an Outperform rating with a $296 target.