AI energy demand back in spotlight
- META announced nuclear power deal with CEG
- AI energy demands exceed single-source solution
- Natural gas a potential “bridge” energy source
Tuesday’s news that Meta (META) inked a two-decade deal to buy nuclear-powered energy from Constellation Energy (CEG) was a fresh reminder of an important market theme that, like many others, may have gotten lost in the noise of the tariff story in recent months: heightened energy demand in an AI-driven world.
Coincidentally, CEG’s intraday rally pushed it to its highest level since just before the late-January report of China’s DeepSeek AI platform triggered a sell-off in many energy stocks, on concerns that more-efficient AI tech would translate into reduced energy demand:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Just a few months earlier, the “nuclear renaissance” was a hot topic—specifically, demand for Small Modular Reactors (SMRs) as tech behemoths Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN) all announced deals with SMR companies to service their AI datacenter energy needs.
While the nuclear story has certainly had legs—for example, While the nuclear story has certainly had legs—for example, three stocks in the space, Oklo (OKLO), Centrus Energy (LEU), and NuScale Power (SMR), are up more than 110%, 90%, and 70% this year, respectively—a new report by Morgan Stanley & Co. researchers suggests AI will require tech companies to tap into a wide range of energy sources—including fossil fuels, and especially natural gas.1
One of the roughly two dozen companies referenced in the report is Energy Transfer (ET), which operates natural gas pipelines and storage facilities. Unlike some of the other stocks cited in the analysis, ET isn’t trading at or near a record or long-term high. While ET shares are up roughly 14% from their April low, that rally followed a 22% correction from their January high of $21.06:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
In addition to arguing that the idea of reduced AI energy demand is overdone, the analysts believe natural gas could play a critical role in meeting datacenter needs. They note that in its latest earnings call, ET said it had received requests from approximately 200 data centers.
The AI energy story may have been pushed out of the headlines, but as the report suggests, it remains compelling—and there are still many chapters to be written.
Market Mover Update: On Tuesday July WTI crude oil futures (CLN5) followed through on Monday’s big gain after OPEC announced a moderate production increase, but the market was still within the boundaries of its nearly two-month consolidation (see “Energy seeks traction”).
Cinemark (CNK) extended its pullback/pause since hitting resistance last week (see “Options highlighting momentum shift?”). A day after breaking out of the upside of a short-term trading range, JFrog (FROG) fell 2.5% on Tuesday, giving back most of Monday’s gain (see “Mixed signals at resistance level”).
Today’s numbers include (all times ET): mortgage applications (7 a.m.), ADP private employment (8:15 a.m.), PMI Composite Final (9:45 a.m.), ISM Services Index (10 a.m.), EIA Petroleum Status Report (10:30 a.m.), Fed Beige Book (2 p.m.).
Today’s earnings include: Dollar Tree (DLTR), Five Below (FIVE), GIII Apparel (GIII), MongoDB (MDB), PVH (PVH), Rev Group (REVG), Verint Systems (VRNT).
Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.
1 MorganStanley.com. Powering AI in the US: Data Points Skew Bullish; Prepare for Transaction Liftoff. 6/2/25.