Nearly every slice of the power industry has logged strong gains this year, as investors chase companies positioned to meet the soaring electricity demands of artificial intelligence. The question now is whether that momentum has room to run, according to the “Heard on the Street” column by The Wall Street Journal on Dec. 24.
Winners span the full spectrum of energy: renewables and fossil fuels, established utilities and speculative startups, and even equipment makers that supply the hardware behind new generation. What ties them together is a simple imbalance. Power supply, long accustomed to slow growth and flat demand, is struggling to keep pace with the rapid expansion of data centers and AI infrastructure.
Early in the AI-driven rally, investors gravitated toward owners of nuclear and natural-gas plants, including companies such as Constellation Energy (CEG) and Vistra (VST). Since then, enthusiasm has broadened across the electricity ecosystem.
Renewable-energy stocks provide one example. The sector started the year under pressure as lawmakers debated cuts to clean-energy subsidies under the One Big Beautiful Bill Act. Once the contours of those changes became clearer over the summer, renewable shares rebounded. That recovery was amplified by what J.P. Morgan analyst Mark Strouse described as a “catch-up trade,” as investors reassessed renewables’ role in meeting AI-related power demand.
Exchange-traded funds tracking clean energy and solar are now up sharply for the year. The rally has also reached less conventional sources, including geothermal. Ormat Technologies (ORA) has gained roughly 65% this year, helped by discussions with data-center operators about renewing power-purchase agreements at higher prices when existing contracts expire.
Nuclear family
Nuclear energy has also benefited, buoyed in part by executive actions from the Trump administration aimed at accelerating nuclear development. Uranium producer Cameco (CCJ) has surged, while nuclear-heavy utilities have climbed as well. Even speculative bets have drawn interest, with small modular reactor developer Oklo (OKLO) posting triple-digit gains.
The boom has spilled over to manufacturers of power equipment. GE Vernova (GEV), which produces natural-gas turbines, has seen its shares roughly double as demand overwhelms supply. That backlog has also lifted companies making smaller, faster-to-deliver equipment, including Caterpillar (CAT) and Cummins (CMI). Fuel-cell maker Bloom Energy (BE) has been one of the most dramatic performers, with its stock rising severalfold this year.
Even coal, often assumed to be in terminal decline, has joined the rally. Peabody Energy (BTU) is up about 50%, and the Energy Information Administration expects U.S. coal consumption to rise this year as electricity demand climbs.
Still, lofty expectations leave little margin for error. Much of the sector already reflects optimism about AI-driven demand, meaning further gains may require a steady flow of positive developments, while disappointments could quickly pressure valuations.
Possible shift in AI sentiment
J.P. Morgan’s Strouse expects investor focus to shift. In 2025, broad exposure to AI-related power demand has been enough to support stocks, he said. By 2026, markets will likely demand concrete evidence—signed contracts, project announcements, and expanding backlogs.
That scrutiny may be uncomfortable for some names. Companies with the most direct AI exposure are already trading at premium valuations, in some cases above 30 times forward earnings. Bloom Energy (BE) stands out at far higher levels. Equipment manufacturers riding the electricity wave are also priced well above their historical averages.
The riskiest corner may be firms with little or no current revenue, including early-stage nuclear developers and ambitious infrastructure plays. One such company, Fermi (FRMI), saw its shares tumble this month after disclosing that a prospective data-center customer had pulled out of a $150 million construction funding commitment.
By contrast, renewable energy appears to be one of the few areas not pricing in aggressive growth. Despite this year’s rebound, valuation multiples for large clean-energy players have remained relatively stable, suggesting earnings expectations haven’t materially shifted.
Scarcity has powered the sector’s gains so far, but it could also create new bottlenecks. Engineering and construction capacity is stretched thin as workers are pulled toward data centers and gas-fired plants, potentially slowing solar and other projects, according to Wood Mackenzie analyst Joseph Shangraw. Such constraints could determine which companies ultimately emerge as winners.
With much of the upside already reflected in share prices, energy stocks may find it harder to keep collecting easy victories in the year ahead, according to “Heard on the Street.”