The current enthusiasm for artificial intelligence, tiresome as it is, does at least compel one to consider the rather prosaic matter of electrical supply. One suspects the digital demiurges haven’t given much thought to where the power from, but the demand is undeniably there. And, rather predictably, we find ourselves revisiting the nuclear option. Vistra (VST 7.33%), a name previously associated with more conventional, if unglamorous, power generation, now finds itself unexpectedly at the centre of things. It’s a curious position, and one shouldn’t expect gratitude from the tech giants, of course.
The Tech Companies’ Reluctant Embrace
Last week brought the news of a twenty-year power purchase agreement between Vistra and Meta Platforms (META 0.04%). One pictures Mr. Zuckerberg, a man not known for his modesty, privately lamenting the necessity of relying on something so…unfashionable as nuclear power. Nevertheless, a contract is a contract, and it will, no doubt, be presented as a triumph of enlightened corporate responsibility. The ripple effect for energy investors, however, is rather more concrete.
More than a year ago, Nvidia’s (NVDA 0.29%) Mr. Huang, a man who understands exponential growth if little else, alluded to the indispensable role of nuclear. A perfectly sensible observation, naturally, but one that lacked the requisite fanfare in the breathless coverage of his company’s achievements. Vistra’s advantage lies in its diversified portfolio – nuclear, gas, coal, even solar – a pragmatic approach that is sadly lacking in much of the current discourse. The ability to provide dispatchable generation – that is, power on demand – is, one suspects, far more valuable than any number of virtue-signalling initiatives.
Data centres, those temples to our collective vanity, are insatiable consumers of electricity. It’s estimated that they will account for twelve percent of U.S. electricity consumption by 2028, a threefold increase from 2023. A truly alarming statistic, though one suspects the architects of this digital age are too busy perfecting the metaverse to notice the looming power crisis.
A Modest Proposition
Vistra currently trades at a forward price-to-earnings ratio just shy of eighteen, with an enterprise value-to-EBITDA ratio of fifteen. Not extravagant, certainly. Indeed, one might even venture to suggest it is undervalued, given the circumstances. The company recently revised its guidance upwards, a welcome sign, though one shouldn’t expect excessive exuberance. A quarterly dividend, paid since 2019, provides a modest return, though it is hardly a fortune. For those seeking exposure to the energy sector, and with a tolerance for the slightly unglamorous, Vistra presents a reasonably sound, if uninspiring, proposition.
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2026-01-18 00:02