The Most Important AI Company You've Never Heard Of

For the past three years, investors have been obsessed with one question: Who will win the artificial intelligence (AI) race?

Most of the attention has gone to familiar names. Nvidia supplies the chips. OpenAI builds the models. Microsoft, Alphabet, Amazon, and Meta Platforms are spending billions of dollars building the infrastructure needed to power AI.

At first glance, the race seems straightforward: Build better chips and models and bigger data centers.

But a surprising problem is emerging. Some of the world's largest technology companies are discovering that having enough AI chips may not be enough. They also need electricity -- a lot of it.

And that reality is quietly changing the economics of the entire AI industry.

Image source: Getty Images.

A surprising move from Microsoft

One of the most important developments in AI over the past few years didn't come from a new chatbot or a breakthrough chip. It came from the energy sector.

In late 2024, Microsoft signed a long-term agreement tied to the restart of a nuclear reactor at Three Mile Island, a facility best known for the 1979 nuclear accident that changed public perception of nuclear energy in the United States.

One of the world's most valuable technology companies is helping bring a nuclear reactor back into operation. Why?

Because Microsoft has long understood something many investors are only beginning to appreciate. The future of AI depends on both computing power and electrical power.

AI has an enormous appetite for power

Every AI interaction requires electricity. When you ask ChatGPT a question, generate an image, or use an AI-powered search engine, thousands of computers inside massive data centers work together to produce a response.

Those facilities consume enormous amounts of energy. As AI models become more capable and widely used, electricity demand continues to rise. That creates a challenge many investors never anticipated.

Building more chips and data centers is difficult. But building new power generation may be even harder. New power plants often require years of permitting, environmental reviews, regulatory approvals, and construction before they can begin producing electricity.

That's a problem because AI demand is growing today. Without power, even the most advanced AI chip becomes an expensive piece of silicon.

Meet Constellation Energy

Most investors have probably never heard of Constellation Energy (NASDAQ: CEG). The company doesn't build AI models, manufacture semiconductors, or sell software. Instead, it is the largest producer of clean, reliable energy in the U.S., owning the largest fleet of nuclear power plants.

At first glance, that may not sound particularly exciting. But in today's environment, those assets may be becoming increasingly valuable.

Nuclear power provides something AI companies desperately need: large amounts of reliable, around-the-clock electricity. As data center demand grows, many experts believe the grid will require a mix of energy sources, including nuclear, natural gas, renewables, and battery storage.

Constellation's advantage is that it already owns one of the largest fleets of operating nuclear plants in the United States. This gives the company optionality as demand for electricity from data centers grow. For example, Constellation Energy could potentially sell electricity to higher-value customers, including data-center operators via direct long term agreements -- just like the agreement it did with Microsoft to supply electricity from Three Mile Island.

So, while most investors still view the company as a utility business, Constellation Energy sits at the intersection of two powerful trends: growing electricity demand and the rapid expansion of AI.

As owners of critical infrastructure often become some of the biggest winners during periods of major economic transformation, Constellation Energy could be that winner in this AI transformation.

What does it mean for investors?

In many ways, Constellation is more a bet that electricity will become one of the most valuable resources in the AI era than on nuclear power.

Whether Constellation Energy ultimately becomes a winning investment remains to be seen. The stock has already attracted significant investor attention, and expectations for future growth are much higher than they were a few years ago. That explains why the stock has risen by close to 600% in the last five years.

Still, investors should keep the stock under their radar. After all, one of the most important questions that AI investors should focus on for the next decade is simple: Who will supply the electricity?

In the United States, Constellation Energy remains the best-positioned company.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Constellation Energy, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.