Power infrastructure continues to be a key theme underpinning the artificial intelligence (AI) growth story on Wall Street, led by anticipated data center demand. Barchart Senior Market Strategist John Rowland, CMT, has previously highlighted the upside potential for battery stocks like EOS Energy (EOSE) and critical metals like copper, but more recent headlines have surfaced a couple of other interesting stocks to watch.
Going “Behind the Meter”
As more and more data centers are looking to come online, four governors recently proposed a unique plan to ease the strain on PJM Interconnection – the largest U.S. power grid, and one that’s currently serving large data center-density states. The proposal, backed by Pennsylvania, Maryland, New Jersey and Virginia, suggests fast-tracking data center approval for candidates who can generate their own power and add it to the grid.
Or, as Rowland describes it more succinctly, “Bring your own power” – think of it as the “BYOP trade.” Naturally, spend-happy hyperscalers are plowing cash into energy investments accordingly.
Meta Platforms (META), for example, just signed new purchase power agreements (PPA) for 100% of the energy from Engie North America’s $900 million solar project, and Amazon (AMZN) inked a long-term PPA of its own with Avangrid to lock in a solar energy supply for its Pacific Northwest data centers.
However, the data center power supply story goes beyond clean energy, as sustainable energy expert Abraham Silverman of Johns Hopkins explained to Inside Climate News: “A hyperscale data center… may be a thousand megawatts. That’s a lot of solar.”
The Blue-Chip Nuclear Story
That’s where nuclear energy comes into play - a subsector where Amazon, Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) have already been investing. Most notably, Microsoft reached a PPA with Constellation Energy (CEG) to restart the Three Mile Island Unit-1 reactor to help meet its soaring energy demands.
Regulators are backing the shift to nuclear, too, with the Tennessee Valley Authority (TVA) recently signing multiple PPAs of its own to bring low-power reactors and small modular reactors (SMRs) onto the grid.
“That’s good for stocks like NuScale Power (SMR),” says Rowland, “but note that GE Vernova (GEV) and Hitachi (HTHIY) keep appearing.”
And for investors who might be wary of the heightened risk that comes with smaller nuclear startups like SMR, the joint venture between GEV and Hitachi – GE Vernova Hitachi Nuclear Energy (GVH) – is absolutely one to know.
As GVH explains it, their BWRX-300 small modular reactor is “not a concept, a plan, or a PowerPoint”; instead, construction is already underway on the first unit in Canada, with commercial deployment projected for 2030.
The joint venture is also partnered with TVA, and an application has been submitted to the Nuclear Regulatory Committee (NRC) to build a BWRX-300 onsite at Clinch River in Oak Ridge, Tennessee. Approval is expected in 2026.
Additionally, utility company Duke Energy (DUK) agreed to invest in the design and licensing of BWRX-300 tech, while American Electric Power (AEP) is looking to deploy the SMR at a coal-powered plant in Spencer County, Indiana.
A “Bridge” Trade for the Grid
Of course, with a few years still to wait before some of these nuclear projects are online and powering the grid, investors may want to look out for a “bridge” trade in the meantime – and notably, Hitachi just might have us covered there, too.
Hitachi Energy recently acquired a minority stake in Blackstone Group (BX) -owned Shermco, a provider of electrical maintenance, repair, and testing, commissioning. The partnership is based on the belief that “service is the backbone of grid modernization,” particularly with more than two-thirds of U.S. transmission lines at or beyond the intended lifecycle.
“By combining Hitachi Energy’s grid expertise and digital solutions with Shermco’s nationwide field service presence, we will set a new benchmark for electrical infrastructure services – creating the leading service partner in North America driving asset reliability and performance as well as digital innovation for utilities, industries and data centers alike,” said Wolf Mueller, Managing Director of Hitachi Energy’s Service Business, in a statement.
What’s the Bottom-Line Power Play?
For investors in search of long-term data center power & infrastructure stocks, GEV and HTHIY are two key players worth adding to your watchlist. With a strong presence across nuclear energy, clean energy, and the power grid, these well-established names offer a less volatile entry into the trade compared to some of the smaller-cap and pre-revenue stocks that are exploding on speculative interest.
Or, as Rowland says, “In the stoic world of utilities, the proven goes a long way over the conceptual.”
On the date of publication, Elizabeth H. Volk had a position in: CEG , MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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