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AI demand keeps climbing - and with it, energy demand. So why is the energy trade split in two right now? Let’s find out…
First, a quick detour.
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THE AI POWER TRADE IS SPLIT IN TWO ⚡
A couple of years ago, the AI power trade looked dead simple:
AI runs on electricity → so you buy the companies that make electricity.
Over the past year though, the money went somewhere else. The companies selling power equipment had a monster year, while the companies that own power plants went backwards.
Bloom Energy is up ~218% and GE Vernova ~58% over the last 12 months, against ~16% for the S&P 500.
Meanwhile, Constellation and Vistra (two of the biggest power plant owners in the U.S.) are both down ~16-17%. 👇
Melvin (one of our PRO analysts) has been on both sides of this.
Back in March, he bought Vistra.
Less than a month later he sold, saying there was "absolutely no momentum" behind it... and Vistra is sitting right around where he bought it.
Bloom, meanwhile, is up ~80% over the same stretch (and Melvin owns that one now).
The difference mostly comes down to speed. A new data center can wait years to get hooked up to the grid. Bloom says its fuel cells (boxes that turn natural gas into electricity right on site) can be up and running in about 90 days.
Then in January, PJM (the biggest grid operator in the U.S.) proposed that new data centers either bring their own power or be the first to get cut off when supply runs short.
That was bad news for anyone selling electricity into the grid, and great news for anyone selling the machines that make it on site.
The orders back it up:
- Bloom did $1.07B in revenue last quarter, up 166% from a year ago, and had a ~$20B backlog as of February.
- GE Vernova's gas turbine backlog, plus the production slots customers have reserved, jumped from 83 gigawatts (GW) to 116 GW in six months.
The plant owners, meanwhile, needed big tech companies to sign long contracts for power from plants that already exist.
Those deals kept not showing up. Politicians turned on data centers over rising power bills, and on Sept 30, Jefferies told clients it expected contracts on existing plants to be "rare."
That same day, Amazon signed a 20-year deal for 690 megawatts from Constellation's Calvert Cliffs nuclear plant in Maryland.
Six days later, Google signed for 3,590 megawatts - including 2,700 megawatts from plants Constellation already runs, on a 15-year contract (so much for rare 🤷♂️).
Constellation jumped more than 12% on the Google news, and Vistra went along for the ride.
Two weeks doesn't undo a year though.
Bloom trades at ~56x next year's expected earnings, and its biggest project (Oracle's Project Jupiter data center in New Mexico) is waiting on a natural gas supply that's been delayed to February 2027.
The plant owners still need to prove Google's deal is the start of a trend. Federal regulators also just froze a key PJM auction until Feb 28, 2027, so the rules aren't settled yet either.
So why are those selling equipment doing better than the energy companies themselves?
In short:
The equipment sellers are agile, while the plant owners are forced to move at the speed of government.
Now you know. 🫡
P.S. Three of our PRO analysts own Bloom. Vincent is up ~92% on his position, Melvin ~44% and Kyle ~36%.
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