Constellation and Vistra Get the Headlines. These 2 Power Producers Barely Get Mentioned.

Constellation Energy and Vistra have become some of the most popular ways to invest in America's growing electricity demand. But they're not the only power producers worth watching.

Talen Energy (NASDAQ: TLN) and NRG Energy (NYSE: NRG) are two lesser-known, potentially undervalued names riding the same power boom. Let's take a closer at both -- and first up is Talen, the more nuclear-focused of the two.

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Nuclear power links Talen Energy to AI data center demand

Talen Energy sits at the intersection of two massive trends: America's growing need for reliable electricity and artificial intelligence (AI) data center demand. Although Constellation gets much of the attention as the premier nuclear power stock, Talen has built a compelling bull case around its Susquehanna nuclear plant.

In fact, Talen's relationship with Amazon has already evolved into a long-term agreement under which Talen will supply carbon-free nuclear power to support AI and cloud computing operations.

The company has also positioned itself as an early mover in connecting large-scale power generation with advanced data centers. On top of Susquehanna, its development of the Cumulus campus gave it a head start. That's a market where access to reliable power has become just as important as access to land or compute hardware.

Beyond nuclear power, Talen also announced its acquisition of additional natural gas generation assets. That strengthens its ability to serve large commercial customers and data centers, especially in high-growth parts of the PJM market.

Despite this, the company must manage several risks. Data center power arrangements face regulatory scrutiny, particularly around how large facilities use the grid. The company is also making significant investments and acquisitions, so solid execution matters a great deal.

The stock trades at a forward price-to-earnings (P/E) ratio of just 10 times, which means investors are paying about $10 for every $1 of expected earnings. That valuation looks reasonable for a company positioned to benefit from AI-driven power demand.

How NRG Energy is growing its power generation capacity

Meanwhile, another company is taking a different route, building a larger and more diversified business. NRG Energy doesn't have Constellation's nuclear portfolio or Vistra's reputation as a market favorite, but its recent moves suggest it could become an increasingly important company in the AI data center boom.

The clearest example is its acquisition of natural gas generation assets and CPower's commercial-and-industrial virtual power plant platform. That deal expanded NRG's power generation portfolio, giving it additional capacity at a time when reliable power is becoming scarcer in key U.S. markets.

NRG is also building and upgrading its own capacity. The company has been pursuing new-generation projects in Texas, where electricity demand is growing rapidly, while also exploring opportunities to repower and expand existing facilities. For example, its recently opened T.H. Wharton plant was an important step in that strategy, with additional projects planned to support future demand.

That said, the company still faces meaningful risks. Namely, its expansion has come with significant capital commitments, while its natural gas assets are also exposed to fuel costs, regulation, and changing power market conditions.

Talen Energy and NRG Energy are two lesser-known power producers with solid bull cases, giving investors alternative ways to invest in the power boom.

Two power producers worth watching beyond the usual names

Constellation and Vistra may get most of the attention, but Talen Energy and NRG Energy deserve a closer look. Indeed, both are expanding their power generation capabilities to meet growing electricity demand, especially from AI and data centers.

With attractive valuations and solid growth catalysts, they offer investors another way to participate in the power boom beyond the market's most crowded trades. Of the two, NRG may suit investors who want a more diversified business. Talen may be a good fit for those comfortable with a more concentrated focus on nuclear and data centers.

Rick Orford has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Constellation Energy, NRG Energy, Talen Energy, and Vistra. The Motley Fool has a disclosure policy.