Remember Nvidia? Jim Cramer Points Out Constellation Energy as a Significant AI Data Center Beneficiary
Posted on May 20, 2024, at 8:21 AM by Adam Spatacco
Main Ideas:
Tech behemoths like Vertiv, Advanced Micro Devices, and Nvidia rule data center services.
The growing need in data centers is helping energy industries, particularly those involved in nuclear power.
Constellation Energy’s nuclear power capability and alliances with major tech companies position it to profit from this development.
The AI Data Center Boom
AI is driving up demand for data center services. Application of generative AI need a lot of server racks, network infrastructure, and cloud storage. Even if Nvidia is a major participant, other businesses are coming up with solid solutions. Statista projects that by 2028 the data center market would be worth over $440 billion.
Constellation Energy, as chosen by Jim Cramer
Constellation Energy (CEG) was just named by Jim Cramer as a top choice for data center services. While it may seem strange, Constellation Energy is in a good position to profit from the AI data center development because of its nuclear power operations.
Energy Use in Data Centers
At around 2% of all electricity used in the United States, data centers use up to 50 times as much as typical commercial offices. Through 2030, Goldman Sachs projects that data center power demand would increase at a 15% compound annual growth rate (CAGR), accounting for almost 8% of all U.S. power consumption.
Unique Position of Constellation Energy
Constellation Energy is qualified to handle data center energy requirements. Though it works in solar, wind, and natural gas energy, its nuclear power capabilities are what draw people in most. Management of Constellation Energy revealed talks on nuclear-powered data centers with digital behemoths Microsoft and Alphabet during a recent earnings call.
The zero-carbon and dependable quality of nuclear power made it appealing for data centers, according to Goldman Sachs.
Does Constellation Energy Make Sense as an Investment?
At 28.4 price-to-earnings (P/E) ratio, Constellation Energy is now trading at a higher P/E than the 24.8 P/E of the S&P 500. In the world of artificial intelligence investments, Constellation Energy presents a special potential even though it looks costly when compared to other utilities. Energy stocks like Constellation Energy should not be disregarded as major IT businesses express interest in nuclear-powered data centers.
To sum up
Constellation Energy is a desirable long-term growth investment because of its nuclear power capability and affiliations to large IT companies. It is a good option even if its price may be higher than that of other utilities because of its ability to profit from the AI data centre boom.
Should You Put $1,000 Into Constellation Energy Right Now?
Think about this before you invest: Constellation Energy was not included in the Motley Fool Stock Advisor team’s most recent list of their top 10 stock selections. Still, the company can be a worthwhile addition to your investment portfolio considering its critical position in the energy and AI industries.
See the Benzinga original piece for additional information and investing guidance.