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NextEra Energy (NEE) is acquiring Symmetry Energy for $800 million and plans to reopen the Duane Arnold nuclear plant by 2029.
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NextEra trades at 26.7 times P/E and offers a dividend yield of 2.7%.
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GE Vernova is up 335% since March 2024 due to turbine demand driven by AI data center power needs.
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AI tailwinds have really boosted energy stocks over the past year, thanks to an impending surge in demand driven by new AI data centers coming online. Without a doubt, it’s not just energy companies with AI data center partnerships that have won big. Even suppliers of heavy machinery (think turbine manufacturers), vital to energy production, have benefited greatly. To be sure, the AI ​​tailwind may not disappear so quickly for energy companies that have gained significant ground in the last year.
If AI electricity usage increases by 300% over the next decade, utilities could benefit profoundly from the rise of AI without having to worry about the big risks that come with direct overinvestment in the technology. While companies like NextEra Energy (NYSE:NEE) certainly stand out as lower-cost ways to benefit from the AI ​​revolution, investors may want to broaden their horizons as more companies, especially in the nuclear sector, look to gain some sort of competitive advantage so they too can fuel the boom that could still be a bigger burden on the grid than originally expected.
In any case, here are two energy stocks with strong AI tailwinds and still modest multiples:
NextEra Energy stands out as an excellent relative value play for investors, with shares trading at just 26.7 times the price-to-earnings (P/E) ratio. The name is also a direct play on power generation for investors who want to take advantage of the AI-related increase in energy consumption in the coming years.
With a recent $800 Symmetry Energy deal about to be signed, the company’s natural gas position looks as impressive as ever. Combined with the reopening of the Duane Arnold Nuclear Power Plant, which will reportedly be back online in 2029, NextEra stands out as a long-term power play for those looking for a higher-performance way to benefit from the growing energy demands of AI. The 2.7% dividend yield is well covered and likely to grow, given NextEra Energy’s reputation as a dividend producer that hasn’t missed a year of increases in several decades.