Investing

2 Utility Stocks to Buy This January

John Seetoo

Published: January 21, 2025 5:01 pm

The Magnificent 7 Stocks: Amazon, Apple, Alphabet (Google), Meta (Facebook), Microsoft, Nvidia, and Tesla – all have one aspect of technology in common. They all have a division of their business devoted to artificial intelligence (AI). Excitement and anticipation over the potential of AI to revolutionize many aspects of both business and personal life are gigantic. From predictive analysis, medicine, finance, household chores, academic education….the possibilities seem limitless.

24/7 Wall Street Key Points:

• President Trump has made no secret of his support for artificial intelligence and cryptocurrency. His advocacy is expected to shape technology policies during his administration.
• In interviews, President Trump has cited the enormous electricity demands of artificial intelligence are double that of current capacity. Wall Street and Dept. of Energy analysts’ calculations believe he underestimated; the requirement will likely be triple current capacity.
• With energy generation demand already spiraling higher, fossil fuels and even less efficient green energy sources will all be urgently needed to shore up supply. 
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Throughout his 2024 campaign, President Trump was a staunch supporter of AI. It dovetailed into his domestic energy policy independence agenda, since he repeatedly cited that AI’s electricity needs were double current US grid output capacity. Therefore, he vowed to eliminate many of the bureaucratic restrictions and constraints on domestic energy production, including Biden’s outgoing executive order attempting to prohibit offshore oil drilling on over 635 million acres of US territorial waters.  However, doubling electric power output may prove to be insufficient. 

Nuclear Power Back On the Table

At present, the US produces 30% of the world’s nuclear power generation. As of mid-2024, there were 94 American nuclear reactors delivering 97 gigawatts’ worth of capacity. Other countries deeply committed to nuclear energy include:

• France – 61 gigawatt capacity, representing 70% of the nation’s electricity source.
• China – With 25 new reactors under construction, China will have 71 total when complete. At present nuclear energy accounts for 5% of its electricity.
• Russia, Japan, and South Korea round out the top 5.

Younger Americans do not share the anti-nuke bias of their Baby Boomer predecessors. Many have come of age in the semiconductor powered digital era, and their requirements for computing power outweigh their aversion to nuclear energy, if it delivers AI, cryptocurrency, and other data center operated products reliably and efficiently. 

As a result, nuclear power is back on the table. Utility stocks have received considerable attention and upside trends, and even nuclear power company stocks have been caught in the tide. Two that have demonstrated resilience during the lower profile times and have benefitted from the recent popularity of utility stocks by the investing public at large are Constellation Energy (NASDAQ: CEG) and Entergy Corp. (NYSE: ETR). 

Constellation Energy

Billing itself as “The Largest Producer of Carbon-Free Energy in the US”, Baltimore, MD headquartered Constellation Energy is responsible for 10% of US carbon-free electricity. Constellation’s 32,400 megawatt capacity is derived from nuclear, wind, solar, hydrogen, and natural gas sources. Its customer base consists of 16 million homes and businesses, with 75% of them Fortune 100 companies. 

Ironically, green energy proponents, on principle, should laud Constellation Energy’s progress, as it is one of the few energy companies pursuing a path towards 0% emissions that actually has a realistic chance of success within the next 5-10 years. 

Constellation Energy has already been tapped by Microsoft for a 20 year electricity purchase agreement. While that deal established their bona-fides within the technology industry as a reliable energy supplier, there is a trickle-down effect that will put Constellation Energy on the short list for many other tech companies’ electricity needs in the future, 

CEO Joseph Dominguez is certainly not coasting on this victory, and has recently announced a high-profile purchase to further cement Constellation Energy’s status and viability.  Described by analysts as “the largest acquisition ever made in the US energy industry”, Constellation Energy announced that it was acquiring geothermal energy producer Calpine Corp. in a combined stock, cash and debt deal valued at $26.6 billion. 

Calpine is one of the largest U.S. natural gas and geothermal resource electricity generators. It owns 84 power plants in operation or under construction delivering more than 27,000 megawatts capacity. While the $26.6 billion sum is gargantuan by any standard, some analysts believe that Calpine’s $30 billion valuation offsets any prospective synergy risks between the Constellation’s nuclear energy generation and Calpine’s prospective commodity risk volatility. 

Investors apparently support the move. Despite Constellation Energy stock already nearly doubling in 2024, the news was greeted with a 25% gain after the announcement. As icing on the cake since 2025 is now underway:

• The US Treasury Department and IRS announced that nuclear companies could now qualify for hydrogen energy tax credits starting in 2025. 
• The US General Services Administration inked an $840 million, 10 year deal with Constellation Energy to supply 13 federal agencies and their various facilities with electric power.

The Calpine acquisition is anticipated to make Constellation Energy, already the largest nuclear energy producer, into the largest indpendent US power supplier.

Entergy Corp.

With a history stretching back 112 years, New Orleans, LA based Entergy Corp. sources natural gas and nuclear energy to deliver electricity to 3 million customers across Louisiana, Arkansas, Texas, and Mississippi. Entergy owns 16,100 miles of high voltage transmission lines across 91,000 square miles of service area. The company also distributes natural gas to customers in Baton Rouge and New Orleans. 

Entergy’s total capacity is 24,000 megawatts, of which 5,000 is derived from nuclear power. Overall, Entergy Corporation’s generation mix consists of 25% legacy gas/oil, 22% nuclear power, 8% coal and 1% renewables.

While Constellation Energy’s upside prospects and appeal are predicated on expanded production capability through its outside Calpine acquisition, Entergy’s focus is on internal expansion, plus reducing expenses and boosting efficiency via capital improvements. The lessons learned from the aftermath of Hurricane Katrina set the wheels in motion. 

Entergy has a 3-year, $19.7 billion plan in effect to decarbonize and modernize its operations that will enhance and maximize distribution and transmission reliability. These improvements are expected to add 6-8% CAGR by 2026. 

A Method To His Madness On Canada and Greenland?

With his vows to drastically cut bureaucratic red tape to free American industry and to reclaim American energy independence, President Trump’s near-term executive orders should bode well for Entergy and Constellation Energy. Keeping ahead of aggressive Chinese and Russian A.I. R&D is of strategic importance, and he is determined that the US maintain its competitive advantage. Subsequent supporting legislation from Congress will codify the new laws to lay out the road map for supporting A.I. and the energy component is crucial for that to happen.

One other point in keeping with President Trump’s urgency towards American energy independence may explain recent controversial statements and social media comments he has made.  Both Constellation Energy and Entergy obtain the majority of their uranium for nuclear energy production from Russia. However, Canada is estimated to have the third largest global uranium reserves after Kazakhstan and Australia. Greenland’s uranium deposit is ranked sixth.