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Nuclear power stocks are surging in the early days of 2025 amid new deal activity, with more growth on the way, analysts say.
Shares of Constellation Energy climbed 4% on Friday, extending Thursday's gain of 8%.
The jump comes after the company announced a $1 billion deal this week to supply nuclear power to over a dozen US government agencies over the next 10 years, marking the biggest energy purchase in the US General Services Administration's history.
The company's competitor, Vistra Corp, also jumped 8.5% to add to an 8% gain in Thursday's session.
Analysts say that while Constellation Energy's deal was relatively modest in size, it could signal further deal activity for the industry in 2025.
"Pricing looks very attractive and could be a positive readthrough to future deals," Morgan Stanley David Arcaro said in a Thursday note regarding the Constellation Energy deal.
Arcaro added that the contract included a surprisingly attractive premium for a federal agency, offering a positive sign for future nuclear deals with tech companies, which would likely pay even more for energy to power their data centers.
"We think tech companies would be generally willing to pay a higher price given sustainability targets and less budgetary pressure, and there could be a broader customer set for these contracts than we were expecting," Arcaro wrote.
Other analysts are similarly bullish on the stocks going into 2025 amid the soaring demand for power related to the artificial intelligence boom.
"Independent power companies should continue to benefit from strong demand and energy/capacity prices in 2025," UBS analyst William Appicelli wrote in a Friday note.
Appicelli reiterated his "buy" rating on Constellation Energy, Vistra, and Talen Energy, forecasting an average gain of 29% for the stocks in 2025.
Such a gain would mark a slight slowdown from outsized growth in 2024, with Vistra surging by over 300% to outpace even Nvidia's blockbuster rally. Talen Energy and Constellation Energy, meanwhile, climbed over 200% and 100%, respectively, amid a boom in AI-related power demand.
AI data centers require massive amounts of power to operate, and their electricity demand is already set to exceed supply in the coming years. To meet demand, the US has to more than double its power grid capacity by 2030, Apollo's Torsten Sløk said in a note last month.
