Editor's note: Big Tech companies have started paying steep premiums for nuclear power. And according to Joel Litman of our corporate affiliate Altimetry, that's no fluke. In this issue – adapted from the free Altimetry Daily Authority e-letter – Joel explains how these energy investments are reshaping the utility sector... and unlocking massive upside.


When Microsoft (MSFT) struck a deal to restart part of the Three Mile Island nuclear plant, it made a splash in the headlines...

Then the story all but disappeared.

Most folks figured it was a one-off. A splashy sustainability play. Maybe a goodwill gesture to restart a shuttered facility.

But they missed something big. For that power, Microsoft reportedly agreed to pay between $110 and $115 per megawatt-hour ("MWh"). That's more than double the going rate.

It seemed like a fluke back then... until Meta Platforms (META) did something similar...

In June, Meta signed a 20-year agreement to buy nuclear power from Constellation Energy's (CEG) Clinton Clean Energy Center in Illinois. Analysts believe it's paying a premium, too – somewhere between $85 and $90 per MWh.

And just like that, overpaying became a trend.

Investors can no longer afford to ignore the uptick in energy prices... and what it means for energy vendors like Constellation.

Tech Giants Are Fueling a Utility Stock Boom

Established utility players are critical to today's Big Tech industry. Companies like Constellation don't need to wait years (or spend billions of dollars) for their projects to come online. They already have facilities set up.

That's why tech companies are racing to make new energy deals – at any cost. As soon as the ink dries, they can start accessing power.

And it's great for Constellation, too. Any premium it charges goes straight to the bottom line.

The Clinton plant is a perfect example. It was previously supported by state credits to stay open. Meta's deal replaces those subsidies.

And Constellation is planning to expand capacity, adding 30 megawatts of additional generation to its existing 1.1 gigawatts.

It's important to understand that these deals don't transfer electrons from one party to another. They're happening in the context of virtual power purchase agreements ("PPAs").

With a virtual PPA, a company pays a fixed price for clean power it never physically receives. In return, it gets the rights to the project's carbon-free attributes, like renewable or nuclear energy credits.

Said another way, it helps tech companies meet environmental goals while buying power from the general grid.

Recent deals show just how badly tech firms want clean, stable energy. They're willing to double the going rate because they need the power... now.

And Constellation is among the biggest providers of a consistent clean-energy supply. That's why it has been inking the biggest deals so far.

The market is just starting to understand these tailwinds. We can see this through our Embedded Expectations Analysis ("EEA") framework.

The EEA works a lot like a betting line in a sports bet... We use Constellation's current share price to calculate what investors expect from future performance and compare those forecasts with our own.

It tells us how well our "team" (the company) has to perform to justify the market's "bet" (the current price).

Constellation's Uniform return on assets ("ROA"), a metric of the company's profitability, reached almost 6% last year – its highest level in a decade.

We use Uniform Accounting at Altimetry to avoid the distortions of traditional accounting methods.

Investors expect that number to nearly double, hitting 11% by 2029...

The market is just starting to recognize how transformative these premium deals can be...

Constellation doesn't need to invest any more in facilities that are already online. So when companies pay more than double what its power is worth, returns can more than double.

Energy stocks were surging back in February. We worried valuations were getting ahead of fundamentals.

But looking at Microsoft and Meta, this shift is clearly already here. The demand is locked in with 20-year contracts.

The story has changed. Constellation and other market-based energy vendors finally have pricing power. And the market is waking up to it.

Good investing,

Joel Litman


Editor's note: Behind the meme-stock headlines and President Donald Trump's new AI plan, a hidden crisis is brewing. A critical AI bottleneck now threatens half of all U.S. stocks. It could spark a market event worse than 2008, according to a firm whose research is followed by BlackRock and Fidelity. Don't miss what may be your last chance to profit from the next – and possibly final – phase of the AI boom.

Further Reading

"Biotech stocks have been dead money for years," Brett Eversole writes. After gaining only 7% over the past decade, most investors have given up on biotech stocks entirely. But this sector is known for major medical breakthroughs… And when momentum returns, the gains tend to come fast.

Palladium mines are shutting down after the metal's multiyear slump. But as history shows, that often signals a major bottom in prices. And with an uptrend already underway, this under-the-radar metal could be starting its next bull run.

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About the Editor
Brett Eversole
Brett Eversole
Editor

Brett Eversole joined Stansberry Research in 2010. He is the lead editor and analyst for True Wealth, True Wealth Systems, and DailyWealth.

Brett boasts a strong background in applied mathematics and statistics, with a degree in Actuarial Science. As an undergraduate, he passed the first three exams for entrance into the Society of Actuaries before focusing on finance at Stansberry Research.

He has put his analytical expertise to work in the markets for the past decade-plus. And, notably, he helped develop True Wealth Systems – one of Stansberry Research's most in-depth, data-driven products – alongside founding editor Steve Sjuggerud.

Brett takes a top-down investment approach. His first goal is spotting big macro trends in the market. These are the kinds of inescapable tailwinds you want as an investor. From there, he looks for opportunities based on valuation and overall market sentiment. Lastly, he always waits for momentum to be in his favor before investing.

This approach means Brett consistently takes a contrarian approach to investing. And combining that with data-driven analysis leads to fantastic long-term performance.

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