For the past three years, investors have been obsessed with one question: Who will win the artificial intelligence (AI) race?
Most of the attention went to familiar names. Nvidia Chips supply. OpenAI builds models. Microsoft, letters, AmazonAnd Meta platforms Billions of dollars are being spent to build the infrastructure needed to power AI.
At first glance, the race is straightforward: build better chips and models and bigger data centers.
But a surprising problem arises. Some of the world’s biggest tech companies have discovered that having enough AI chips isn’t enough. They also need electricity — lots of it.
That fact is quietly changing the economics of the entire AI industry.
Image Source: Getty Images.
A surprising move by Microsoft
One of the most significant advances in AI in the past few years hasn’t come from a new chatbot or a breakthrough chip. It comes from the energy sector.
In late 2024, Microsoft signed a long-term deal to restart the reactor at Three Mile Island, best known for the 1979 nuclear accident that changed the public’s view of nuclear power in the United States.
One of the world’s most prestigious technology companies is helping to bring a nuclear reactor back into operation. Why?
As Microsoft has long understood, many investors are beginning to appreciate it. The future of AI depends on both computing power and electrical power.
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$92B
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gross margin
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AI has an enormous appetite for power
Every AI interaction requires electricity. When you ask ChatGPT a question, generate an image, or use an AI-powered search engine, thousands of computers in massive data centers work together to generate an answer.
Those facilities use enormous amounts of energy. As AI models become more efficient and widely deployed, the demand for electricity continues to increase. This creates a challenge that many investors do not anticipate.
And making chips and data centers is difficult. But developing new power generation may be more difficult. New power plants require years of permitting, environmental reviews, regulatory approvals and construction before they can begin generating electricity.
That’s a problem today as the demand for AI grows. Without power, even the most advanced AI chip becomes an expensive piece of silicon.
Meet the star power
Most investors have never heard of it Stellar energy (CEG 3.64%). The company does not build AI models, manufacture semiconductors or sell software. Instead, it is the largest producer of clean, reliable energy in the United States, owning the largest fleet of nuclear power plants.
At first glance, it might not be particularly exciting. But in today’s environment, those assets can become valuable.
Nuclear power gives AI companies something they desperately need: large amounts of reliable, round-the-clock power. As data center demand grows, many experts believe the grid will require a mix of energy sources, including nuclear, natural gas, renewables and battery storage.
Constellation’s advantage is that it already has one of the largest fleets operating nuclear power plants in the United States. This gives the company an option when the demand for electricity from data centers increases. For example, Constellation Energy can sell electricity to high-value customers, including data center operators, through direct long-term contracts, as it did with Microsoft to supply power from Three Mile Island.
So, while most investors view the company as a utility business, Constellation Energy sits at the intersection of two powerful trends: growing electricity demand and the rapid expansion of AI.
As owners of critical infrastructure become some of the biggest winners in times of major economic change, Galaxy Energy could be a winner in this AI transition.
What does this mean for investors?
In many ways, the galaxy is betting more that electricity will become one of the more valuable resources in the AI era than nuclear power.
It remains to be seen whether galactic energy will ultimately turn out to be a successful investment. The stock has already attracted significant investor attention, and expectations for future growth are higher than they were a few years ago. This explains why shares have risen close to 600% over the past five years.
However, investors should keep the stock under their radar. After all, one of the most important questions AI investors will need to focus on over the next decade is simple: Who will provide the electricity?
In the United States, Constellation Energy is the best-placed company.
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