From photovoltaics and nuclear power to coal "taking off across the board," how long can the "AI-powered energy" theme in U.S. stocks last?

The power supply shortage brought about by artificial intelligence has driven a broad rally in U.S. power stocks this year, but with valuations having already priced in much of the optimism, investors will shift focus next year to companies’ actual execution abilities.

This year, the U.S. power sector saw a rare across-the-board surge, with substantial increases from clean energy to coal, mature technologies to speculative projects—the core driver being the power supply gap created by AI data centers.

U.S. renewable energy ETFs have climbed 50%-60% this year, nuclear power and natural gas equipment manufacturers’ share prices have doubled, fuel cell companies have tripled, and coal stocks are up about 50%. According to J.P. Morgan equity analyst Mark Strouse:

2025 will still be early in the cycle, and investors only need AI exposure. But by 2026, we’ll need to see actual deal announcements and order accumulation.

Currently, most power stock valuations have reached historical highs, with some companies even exceeding tech giants. As soon as supply shortages shift from being a tailwind to a constraint, this “everyone wins” energy trade may be hard to sustain.

A Broad Rally from Nuclear Power to Coal

This surge in the power sector covers an exceptionally wide range.

Uranium miner Cameco is up about 80% this year, nuclear power plant operator Constellation Energy is up about 60%, and even speculative small modular reactor stock Oklo has surged more than twofold. Administrative orders from the Trump administration accelerating nuclear energy applications have provided additional momentum for the sector.

Equipment manufacturers have also performed strongly. Natural gas turbine maker GE Vernova’s shares have doubled, with long-standing backlog orders driving demand for smaller, more accessible but pricier power equipment.

Engineering machinery manufacturer Caterpillar, which makes small turbines, and engine maker Cummins are up about 60% and 50% respectively. Fuel cell company Bloom Energy’s stock has tripled.

Even the coal industry has enjoyed gains, with Peabody Energy climbing about 50% this year. The U.S. Energy Information Administration estimates that driven by power demand growth, U.S. coal consumption in 2024 will rise 9% versus last year.

Renewable Energy “Catch-Up Trades”

U.S. renewable energy stocks started the year sluggishly, as the “Inflation Reduction Act” put the sector’s subsidies on the chopping block.

But this summer, as the scale of renewable tax credit cuts and eligibility rules were clarified, the sector began to rebound. Then, investors focused on AI-driven power demand unleashed a wave of “catch-up trades.”

The Invesco WilderHill Clean Energy ETF and Invesco Solar ETF are up roughly 60% and 50% respectively so far this year.

(Invesco Solar ETF is up about 50% this year)

Geothermal energy firm Ormat Technologies is up about 65%. The company says it is negotiating with data center clients to sign new power purchase agreements at higher prices when existing geothermal facility contracts expire.

Analysts believe that although certain clean energy stocks have risen this year, their valuation multiples have not expanded, meaning earnings expectations have not increased.

Leading renewable firm NextEra Energy’s forward P/E ratio is roughly flat from the start of the year, remaining near 20 times.

U.S. solar manufacturer First Solar’s valuation multiple has expanded to 12 times, but it’s still cheap relative to its historical average.

Valuations at New Highs

Valuations for most power subsectors now reflect a great deal of optimism, meaning further upside would require more good news, while even a little bad news could trigger declines.

Companies most directly tied to AI power demand already carry valuations above those of major tech names. Constellation Energy, GE Vernova, and Cameco all have forward P/E ratios above 30.

Fuel cell manufacturer Bloom Energy holds a forward P/E of 90 times—among the priciest energy stocks.

Turbine manufacturers are also highly valued, with Caterpillar and Cummins trading at premiums of 50% and 44% over historical valuation levels, respectively.

The most likely to see pullbacks are companies with zero or very little revenue.

This includes small modular reactor startups Oklo and NuScale Power, as well as Fermi, which plans to build nuclear + natural gas hybrid power plants for data centers. The latter sold off sharply this month after a potential tenant withdrew from a $150 million construction funding agreement.

Supply shortages have been a boon for energy stocks this year, but could become headwinds in future.

According to Wood Mackenzie research analyst Joseph Shangraw, engineering, procurement, and construction contractors are in short supply because they are now handling both data center and natural gas power projects, drawing skilled labor away from solar projects. These physical constraints may cause winners and losers within the sector.

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