The growth potential of AI has helped propel this surprising stock to over 140% growth. Does it still have the fuel to keep growing?

AI is a game-changing technology. It can significantly increase productivity and reduce costs. It is are driving companies to spend billions of dollars buying AI chips to train models and power applications.

The artificial intelligence investment frenzy has gained momentum semiconductor stocks as Nvidia. However, chip sellers are not are the only ones to benefit from the AI ​​boom. One of the potential beneficiaries that could be surprise Is Constellation Energy(NASDAQ: CEG). Leading nuclear energyproducer’s Over the last year, the share value has increased by over 140%. Here look at what is fueling this rally and whether power producer’s stocks may continue to rise.

Artificial intelligence needs data and power

AI applications have several important requirements. They need huge amounts of data to train AI models and enormous power to run specialized chips developed by companies like Nvidia. These catalysts I am driving growing demand for data centers to house servers and AI processes.

Data centers are energy-intensive facilities. They use 10 to 50 times more energy per floor space than a typical office building. Meanwhile, AI data centers consume even more energy. For example generative artificial intelligence search requires four to five times more processing power than standard search. This leads to the view that AI could drive a more than 160% increase in data center power demand by 2030, increasing data center power consumption from 1-2% of global consumption to 3%-4%.

This increase in power demand comes at a time when the world is already racing switching from fossil fuels to lower emission alternative energy sources. This could accelerate the already high demand for renewable energy sources. However, renewable energyjargon carry all that load by yourself. More intermittent energy sources such as wind and solar will need the help of baseload producers like natural gas and nuclear energy.

It is where Constellation Energy comes into play. His the country the largest producer of zero-emission energy, mainly thanks to its leading fleet of nuclear power plants. The company could benefit from growing demand for nuclear energy to power data centers in the coming years. This has helped fuel its massive rally over the past year.

There is a huge growth ahead of us

Constellation Energy is working to harness the power of artificial intelligence possibility. This companies CEO Joseph Dominguez recently commented on this:

Was in advanced discussions with many clients, large – well-known companies that you all know – about meeting their needsS… One sec was not finished However, I expect that we will finalize agreements that will have long-term and transformative value.

Signing power purchase agreements with big tech companies to power their AI data centers would give Constellation increasingly visible revenue from existing power plants. That would add companies already solid prospects for earnings growth. Constellation Energy expects to grow its core earnings by more than 10% annually through 2028.

This perspective also NO take into account new expansion opportunities that may arise as artificial intelligence increases energy demand. Constellation Energy can provide additional resources investment opportunities in renewable energy and storage projects. It could also create new opportunities for investing in nuclear energy. The company is, for example, looking at adding new small modular reactors and other technologies that will help deliver more baseload energy to data centers.

take a look at what is left in the fuel tank

Although Constellation Energy has great growth potential, it NO that means it will have enough power to continue rallies. Shares of the lower-carbon energy producer are currently trading at around forward P/E a ratio of over 28.5 times. It is quite expensive, especially for usable supplies. It is recorded closer to the rapidly rising level Nasdaq-100 index (almost 29 times the P/E ratio). It is much more expensive than the wider market ( S&P 500‘S forecast P/E is around 22 times) and other large utilities (their shares are trading at 15-22 times forecast P/E, although they are growing slower than Constellation, at a single-digit rate).

The current AI craze could continue to lift Constellation Energy’s stock, especially if it signs contracts to supply nuclear power to AI data centers. However, it is trading at a high valuation. For this reason, if AI power agreements are not fulfilled or Thishits an unexpected drop in stock prices could cause them to cool down quickly.It is why investors may want to has put Constellation Energy on its watch list For now instead, consider another tool with AI-powered growth potential.

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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Constellation Energy and Nvidia. The Motley Fool has a disclosure policy.