Constellation Energy Corporation (NASDAQ:CEG) shares surged 12.2% on October 6, among the S&P 500’s biggest gains that day. The jump followed a 20-year deal with Google to add 890 megawatts of new nuclear power. Constellation will get there by upgrading 11 existing reactors, backed by $4.3 billion in new investment. These upgrades, known as uprates, let existing reactors produce more power without building new ones.
The partnership also includes a separate 15-year agreement covering 2,700 megawatts from Constellation’s existing nuclear fleet. Other power producers surged sharply too. Talen Energy rose 12.4%, Vistra climbed 10.7%, and NRG gained 7%. CEG wasn’t the only power stock to surge, which is why you may want to see why Jim Cramer is taking another look at this group.
CEG is one of the 10 Best AI Energy Stocks to Buy in 2026. Check out where it ranks and which other stocks made the list.
Why I Like Upgrading Over Building
The part I find most interesting is the cost. Upgrading reactors that already exist is far cheaper than building new ones. Constellation is spending $4.3 billion to add 890 megawatts. The last new U.S. reactors, Vogtle 3 and 4 in Georgia, cost more than $35 billion for about 2,200 megawatts. On a simple capital-cost-per-megawatt basis, Vogtle cost roughly 3.3 times as much, although the projects differ in scope and timing. Vogtle also took about 15 years, while Constellation expects its first upgrade by 2028. KeyBanc’s Sophie Karp made a point I agree with. Constellation is growing through commercial deals, so it doesn’t need to wait for power market reforms to play out. CEG is well-positioned to benefit from AI’s growing power needs, but which other energy stocks could offer investors an opportunity to profit from the same trend?
The Rally Hasn’t Made It Expensive
Even after the jump, Constellation is still down about 18% this year and trades below its usual valuation. The forward non-GAAP P/E of 22.04x sits about 17% under its 5-year average of 26.53x. Analysts expect EPS to grow about 29% in 2026, then slow to roughly 10% in 2027. Growth is then expected to pick back up to 24% in 2028 and 19% in 2029. That rebound coincides with the expected start of the Google-backed upgrades in 2028, although the full 890-megawatt expansion is not expected until 2032. Based on 2028 earnings, the P/E drops to about 16x. Net debt sits near $24 billion, largely after the Calpine acquisition. Long-term contracts provide greater revenue visibility, although the increased debt load and substantial capital spending remain risks.
Hedge funds were trimming before this deal. Funds holding Constellation fell from 79 in Q1 to 73 in Q2, and their stakes dropped from $3.4 billion to $2.7 billion.
The Google deal shows Constellation can grow without building reactors from scratch. With the stock still below its usual multiple, I think the rally has room to run.
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